HONG KONG (AFP) – Asian traders extended a rally across world markets yesterday as they welcomed figures showing United States (US) inflation slowed further last month, tempering concerns about the Federal Reserve’s forecast of just one interest rate cut this year.
The weaker-than-expected May consumer price index marked a second successive month of slowing – to a more than three-year low – and boosted optimism that the central bank would be able to soften monetary policy after a long-running campaign of tightening.
The figures also calmed investors spooked by last Friday’s blockbuster non-farm payrolls data that indicated the labour market remained tight and the economy in rude health, making it harder to lower borrowing costs.
Asian markets largely welcomed the news out of Washington, with Hong Kong, Sydney, Seoul, Mumbai, Singapore, Wellington and Jakarta all higher, although Tokyo, Shanghai and Manila dipped.
London, Paris and Frankfurt were all lower in the morning session yesterday.
The slowdown in US inflation and the prospect of Fed rates coming down weighed on the dollar on Wednesday, although it edged back against most peers yesterday.
Observers said the euro was also supported by French President Emmanuel Macron’s commitment not to resign if his party lost snap elections he called at the weekend after a shock defeat by the far right in European Union-wide polls.
Macron said he wanted to form an alliance against political extremes in the vote, adding that he aimed to keep the far right from succeeding him when he steps down in 2027.
Investors are also keeping an eye on the yen as the Bank of Japan started a two-day policy meeting, with speculation swirling that it is preparing the ground for a further tightening after lifting interest rates in March for the first time in 17 years.
