SINGAPORE, Sept 16 (Reuters) - Asian stocks experienced a significant boost on Tuesday, with the U.S. dollar retreating as investors anticipated that the U.S. Federal Reserve would resume its easing cycle this week, potentially paving the way for further rate cuts. Market reactions remained muted following the narrow confirmation of Stephen Miran to the Fed's Board of Governors by the U.S. Senate, alongside a U.S. appeals court's decision not to permit President Donald Trump to dismiss Fed Governor Lisa Cook. These developments are not expected to influence the Fed's decision on Wednesday, where a 25-basis-point cut is already fully priced in.
Market analyst Tony Sycamore at IG noted, “There are certainly concerns around the politicisation of the Fed and President Trump's pressure to adjust the board. However, it seems a 25-basis-point cut remains firmly in place.” The anticipation of imminent Fed rate cuts has sustained a positive market sentiment over recent sessions, driving stocks to new heights.
European stock futures, particularly the EUROSTOXX 50, remained relatively flat, while the FTSE futures saw a slight increase of 0.08%. Meanwhile, DAX futures edged up by 0.03%. Investors are also keenly awaiting the Fed’s dot plot projections for interest rates and guidance from Fed Chair Jerome Powell regarding the extent and pace of any future easing. Futures markets have already priced in an impressive 127 basis points worth of cuts by July 2026, making it clear that anything less than dovish guidance from the Fed could disappoint investors.
Thomas Mathews, the head of markets for Asia Pacific at Capital Economics, commented, “There do seem to be quite a few rate cuts priced in now, suggesting that the bar for a hawkish surprise is lower than for a dovish one.” It is widely anticipated that the Fed will maintain its cautious communication style and refrain from revealing too much at this week’s meeting.
In the U.S. market, Nasdaq futures rose by 0.14%, and S&P 500 futures gained 0.08%, following both indexes reaching all-time highs during the cash session overnight.
In a separate development, U.S. and Chinese officials announced on Monday that they had reached a framework agreement to transition the short-video app TikTok to U.S.-controlled ownership. This agreement is expected to be finalized in a call between President Trump and Chinese President Xi Jinping on Friday.
The anticipated Fed rate cuts have placed additional pressure on the dollar, which fell to its lowest level since July 24 against a basket of currencies on Tuesday. The British pound surged to its highest point in over two months at $1.3624, while the euro also hit its peak since July 24 at $1.1787. The risk-sensitive Australian dollar reached a 10-month high of $0.6677 before slightly retreating to trade 0.1% lower at $0.6662. Carol Kong, a currency strategist at Commonwealth Bank of Australia, remarked, “The Aussie has been outperforming recently due to market expectations of the FOMC restarting interest rate cuts, which is positive for the global economic outlook, especially as trade uncertainties have eased.”
In the bond market, U.S. Treasury yields remained largely unchanged after a dip in the previous session, with the two-year yield standing at 3.5366% and the benchmark 10-year yield steady at 4.0375%.
Turning to commodities, oil prices continued to rise from the previous session as investors evaluated the implications of Ukrainian drone attacks on Russian refineries. Brent crude futures climbed 0.25% to $67.61 per barrel, while U.S. crude increased by 0.27% to reach $63.47 a barrel. Additionally, spot gold achieved a record high of $3,689.27 an ounce, bolstered by a weaker dollar and expectations of Fed rate cuts.
Reporting by Rae Wee; Editing by Sam Holmes
