While the outlook for U.S. inflation has weakened, expectations for a September rate hike by the BOJ have strengthened in Japan. Markets are seeking to assess the direction of the FRB's rate outlook and price trends in Japan.
July U.S. CPI was in line with market expectations, with limited surprise, and views that expectations for a September rate hike have receded are becoming more widespread in short-term markets. U.S. employment indicators also came in below market expectations, prompting greater caution over the outlook for the FRB's monetary policy.
Japan's wholesale prices were reported to have risen 7.2% year on year in July, strengthening expectations that the BOJ may raise rates as early as September. Asian stocks were broadly higher, with the Nikkei Stock Average up 1.61% in the morning session, supported by semiconductor-related stocks.
European futures rose, while oil prices fell. Talks between the United States and Iran have stalled, and markets are pricing in downward revisions to the global demand outlook amid the impact of the situation in the Middle East. The Reserve Bank of Australia's deputy governor suggested that additional rate hikes remain possible, and the outlook for major central banks is again in flux.