Asian stocks rise, and the dollar eases ahead of U.S. inflation data. With investors being cautious in front of central U.S. inflation data later in the day, which will set the tone for a week loaded with central bank meetings, Asian equities climbed on Tuesday, but the dollar slid down. This was because investors were anticipating the news.

The Federal Reserve of the United States primarily anticipates maintaining the current level of interest rates on Wednesday. The main focus of interest will be on the remarks made by Chair Jerome Powell at his press conference, the dot plot, and the central bank’s economic forecasts.

Before that, the Consumer Price Index (CPI) data that will be released by the United States Department of Labor later on Tuesday is anticipated to reveal that inflation is still decreasing but remains much higher than the Federal Reserve’s yearly objective of 2%. The core CPI is anticipated to come in at 4%.

Because of this, investors are cautious about placing significant wagers, and futures indicate that European stock markets will have a subdued opening. There was a 0.11% increase in the Eurostoxx 50 futures, a 0.17% increase in the German DAX futures, and a 0.06% increase in the FTSE futures.

The MSCI broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.54% and was based on Asia.

According to Ben Bennett, an investment strategist with Legal and General Investment Management (LGIM) in the Asia-Pacific region, “I believe that a soft landing is now firmly priced into markets and is quickly becoming the consensus outlook for 2024.”

“So if the data strays far from that path, there could be some disappointment.”

At the beginning of the month, a plethora of economic data and statements made by Fed officials led investors to believe that the Federal Reserve would begin reducing interest rates at the beginning of the following year. However, since then, investors have lowered some of their expectations.

Using the CME FedWatch tool, the markets are currently pricing in a 48% likelihood of a rate drop in March, a decrease from the 57% chance that was priced in a week earlier. On the other hand, the markets have priced in a 75% possibility of a reduction in May.

Since the previous meeting of the Federal Reserve, which took place at the beginning of November, financial circumstances have become more relaxed, and there is a good chance that this will influence the way the central bank thinks.

According to Erik Weisman, chief economist and portfolio manager at MFS Investment Management, “The Federal Reserve will feel that it cannot afford to have financial conditions ease further.” This is because additional easing of financial conditions might re-accelerate labor demand and put fresh upward pressure on the consumer inflation rate.

“Whether the market takes the hint remains to be seen and will likely be driven by the unfolding macro data more than Fed jawboning.”

Four central banks will meet on Thursday: the European Central Bank, the Bank of England, the Norges Bank, and the Swiss National Bank. This is a busy week for central bankers.

There was a decrease of 0.11% in China’s blue-chip stocks (CSI300), while the Hang Seng index (HSI) in Hong Kong increased by 0.60%. This occurred as investors searched for indications of official support following the release of data that revealed China’s consumer prices in November had their most rapid decline in three years.

Following the lackluster auctions of three-year and ten-year Treasury notes on Monday, the yield on 10-year Treasury notes dropped by 3.1 basis points, reaching 4.208%.

Investors were hesitant to purchase Treasury securities at the auctions due to the decreased liquidity following the release of the inflation data and the Federal Reserve meeting scheduled for this week.

Following the auction of $50 billion in reopened three-year notes and $37 billion in 10-year notes on Monday, the Treasury Department will offer $21 billion in reopened bonds with a maturity of thirty years to sell them on Tuesday.

Even though anticipation that the Bank of Japan was ready to walk away from its ultra-loose monetary policy diminished after Bloomberg reported on Monday, citing sources, that BOJ policymakers see little reason to hurry out of negative rates, the Japanese yen continued to be the focus of attention in the currency markets.

The yen increased by 0.54% to 145.39 per dollar, recouping significant overnight losses. The Board of Directors is scheduled to get together the following week.

To reach 103.92, the dollar index, which compares the United States dollar to six other currencies, including the yen, declined by 0.135%.

Following a three-week low reached in the previous session, gold prices experienced a little increase and were most recently trading at $1,987.49 per ounce.

On the day, the price of a barrel of crude oil in the United States increased by 0.7% to $71.82, and the price of a barrel of Brent crude increased by 0.63% to $76.51.