Asian Stock Market: Responses vary ahead of Fed Powell’s speech and ECB policy

• Asian indices are mostly trading positive amid a weaker DXY.
• Japanese equities have soared on higher-than-expected GDP data.
• Fed Powell will adopt a hawkish stance on interest rate guidance.

Markets in the Asian domain are displaying varied responses as investors are awaiting the interest rate decision by the European Central Bank (ECB) and guidance on US interest rates by Federal Reserve (Fed) chair Jerome Powell. Although, markets are majorly positive, however, the extent of gains is highly deviated.

At the press time, Japan’s Nikkei225 soared 2.28%, China A50 added 0.16%, Nifty50 gained 0.70% and Hang Seng slipped 0.59%.

Japanese equities are been infused with an adrenaline rush after the release of upbeat Gross Domestic Product (GDP) data. The economic data has improved meaningfully to 3.5% against the expectations and the prior print of 2.9% and 2.2% respectively on an annual basis. Also, the quarterly data has been recorded higher at 0.9% against the forecasts of 0.7% and the prior release of 0.5%.

Outside Tokyo, in the Asia-Pacific region, a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe impacted the commodity-linked currency. RBA Lowe has trimmed down the extent of the ‘hawkish’ stance. The RBA believes that the rate hike cycle will continue further, however, the pace of hiking the Official Cash Rate (OCR) will slow down. In its monetary policy meeting on Tuesday, RBA Lowe dictated that the OCR will peak at 3.85%.

In today’s session, the interest rate policy of the European Central Bank (ECB) will be keenly watched. As price pressures are soaring dramatically, ECB President Christine Lagarde will announce a rate hike of 75 basis points (bps). This will hike the borrowing rates to 1.25%.

Meanwhile, the US dollar index (DXY) is juggling in an extremely narrow range ahead of Fed Powell’s speech. Investors should brace for a hawkish stance on interest rate guidance as price pressures are still beyond the whooping figure of 8%.