Asian Stocks rose, Dollar Wobbly as US inflation data reinforces Fed pause bets

On Wednesday (June 14), Asian stocks rose and the dollar fell as slowing US inflation reinforced bets that the Federal Reserve would forego a hike later in the day, but further rate hikes beyond this week remained uncertain.

The closely watched US CPI report released overnight showed that prices barely rose in May, rising by 0.1% from the previous month. Consumer prices rose 4% year on year, the smallest increase in more than two years, slowing from 4.9 percent in April.

That led traders to firm up expectations of a rate pause by the Fed to 91.9 per cent when it concludes a two-day policy meeting on Wednesday, but the still-strong underlying price pressures suggest an over 60 per cent probability the central bank could resume hikes in July, according to CME Group's FedWatch Tool.

Both S&P 500 futures and Nasdaq futures were flat, after a strong rally overnight to their highest closing levels in 14 months thanks to the softer US inflation data.

"While the soft headline inflation print gives the Fed the go-ahead to pause its rate hiking cycle on Thursday, sticky core inflation will keep the Fed's hawkish trigger finger hovering over the rate hike button in the months ahead," said Tony Sycamore, a market analyst at IG.

Perhaps reflecting some of those concerns, two-year Treasury yields hit 4.7070 per cent overnight, the highest since March, before easing a little to 4.6556 per cent in Asian hours.

The benchmark 10-year yields also climbed to the highest in two and a half weeks at 3.8450 per cent. They were last at 3.8075 per cent.

Markets would also be focusing on the post-policy press conference from Fed Chair Jerome Powell and whether the dot plot would signal any hikes ahead.

The euro was hanging at US$1.0794 after hitting a three-week top of US$1.0823 overnight, while sterling settled at US$1.2613, nearing a one-month high of US$1.2625 reached overnight.

Oil prices were lower in early trade after receiving a 3 per cent boost on China's policy rate cut. US crude futures were off 0.5 per cent to US$69.12 per barrel, while Brent crude futures fell 0.4 per cent to US$74.02 per barrel.