The Reserve Bank of India’s October policy was a close call with growing clamour for easing of policy rates as India’s growth outlook has become more uncertain. India’s real GDP growth outlook is caught between the tailwinds of the GST rate cuts and the headwinds of the US’s steep tariffs. Meanwhile, inflation remains subdued, led by deceleration in food inflation. Despite the heightened uncertainty on India’s growth, RBI on Wednesday maintained status quo on policy rates and retained its neutral stance. T ...

Core Viewpoint - Federal Reserve Chairman Jerome Powell's recent remarks indicate a potential shift in risk balance, which may justify adjustments in policy stance, leading to significant market reactions globally [1] Group 1: Monetary Policy Flexibility - Powell emphasized that monetary policy is not on a preset path but is based on data evaluation and its impact on economic outlook and risk balance, reassuring the market that the Fed is not deviating from its usual methods due to political pressures [2] - His nuanced approach, including the "balanced narrative" acknowledging temporary inflation driven by tariffs and recognizing cracks in the labor market, suggests decisions are based on objective economic data rather than political factors [2] Group 2: Market Reaction and Expectation Management - Despite Powell's cautious tone, the market exhibited great enthusiasm, indicating a strong expectation for easing policies, which may have led to an overreaction following his remarks [3] - Powell's careful framing of his statements suggests he aimed for a "small rise" in market sentiment, but prior suppressed emotions resulted in a significant market surge [3] Group 3: Key Signals for the Future - Powell's speech revealed three key signals: a near certainty of a rate cut in September, with the extent (25 or 50 basis points) dependent on upcoming employment and inflation data [4] - The market may have already priced in a "win-win" scenario of easing and growth, but economic data remains a variable, with critical reports on non-farm payrolls and CPI due soon [4] - Political risks persist, as ongoing criticism from Trump may raise concerns about the Fed's independence, potentially increasing volatility in the dollar [4] Group 4: Lack of Market Consensus - Although a September rate cut seems likely, there is a lack of consensus on future market direction, with varied interpretations from Wall Street analysts [5] - Some analysts caution that the market may be overreacting, while others suggest increasing positions in rate cut trades, and some predict multiple rate cuts by 2025, indicating uncertainty ahead [5] - This lack of consensus poses a risk for the market, as future economic data and political conditions remain unpredictable [5]

Core Viewpoint - The Australian dollar (AUD) is experiencing an upward trend against the US dollar (USD), supported by strong domestic demand and encouraging retail sales data, despite short-term pressure from a strong USD index [1] Economic Indicators - July retail sales data in Australia exceeded expectations, providing solid support for the AUD [1] - Ongoing decline in inflation pressures offers the Reserve Bank of Australia greater flexibility in monetary policy [1] - A robust employment market further strengthens the economic fundamentals of Australia [1] Market Outlook - Analysts believe that structural advantages in the Australian economy will dominate exchange rate trends once market volatility subsides [1] - Most institutions anticipate that the AUD/USD exchange rate will gain upward momentum in the coming months as the Federal Reserve's rate hike cycle nears its end [1] Upcoming Data - Market participants are closely monitoring the upcoming Australian business confidence index and employment data, which will further validate the sustainability of the economic recovery and provide new guidance for AUD movements [1] Technical Analysis - The AUD/USD exchange rate has shown a noticeable adjustment after reaching a peak of 0.6624, with short-term pullback momentum increasing [1] - The current RSI indicator is at 49.5615, indicating a neutral zone without overbought or oversold signals; however, a drop below 45 could signal further downside risks [1]

Core Viewpoint - The Bank of Japan (BOJ) is facing internal divisions regarding its monetary policy direction, with some members advocating for a resumption of interest rate hikes despite external pressures, particularly from potential U.S. tariff increases [1][2]. Group 1: Monetary Policy Outlook - BOJ board member Hajime Takata warns that the current pause in the interest rate hike cycle will be temporary, suggesting a return to tightening in response to economic changes [1]. - Takata emphasizes the need for flexibility in monetary policy execution due to heightened uncertainty, particularly regarding U.S. trade policies [1]. - BOJ Governor Kazuo Ueda remains cautious, highlighting that core inflation is still below the 2% target and indicating a preference for clear upward trends before considering rate hikes [1][2]. Group 2: Inflation and Economic Conditions - Japan's inflation rate is currently the highest among G7 countries, with key living cost indicators reaching a two-year high, yet the BOJ is cautious about the sustainability of this inflation driven by food prices [2]. - The BOJ's unique monetary policy path reflects its specific considerations regarding domestic economic conditions, balancing inflation control with economic growth support [2]. - There is a consensus among BOJ members on the importance of maintaining flexibility and closely monitoring both domestic and international economic developments [2].

Core Viewpoint - The Bank of Japan's policy may become more flexible in response to the Federal Reserve's indication of not rushing to adjust its policy stance [1] Group 1 - A committee member of the Bank of Japan expressed that the current stance of the Federal Reserve could influence Japan's monetary policy [1]