Asia open: For a one-word description, “Goldilocks” doesn't quite fit the bill today

Friday's focus in Asia is squarely on the Bank of Japan's policy announcement, as investors eagerly await any clues regarding potential intervention in the currency market. This ongoing game of intervention hide and seek adds an element of intrigue to the global FX markets. 

Additionally, investors should be revelling in the latest earnings reports from U.S. mega-tech companies, which have the potential knock in fashion to influence sentiment and trading dynamics across the Asian market positively.

The highly anticipated US PCE data set for release on Friday stands as a crucial juncture for equity investors, offering a key insight into market sentiment. The pivotal question revolves around the relative influence of earnings versus yields on equity markets.

As for US GDP, the 1.6% pace, while still healthy, was the most tepid since 2022’s (non)recession and counted as a huge miss. Consensus expected 2.5% from the advance read on headline growth.

This development certainly comes as a surprise. The latest update from the Atlanta Fed's GDPNow tracker pegged growth at 2.7%, indicating that the domestic macro narrative in Q1 was largely centred on ongoing economic overheating.

Now, onto the unequivocally concerning news. While the headline inflation index met expectations, the core inflation jumped—by a considerable margin. And to say the actual figure overshot is an underestimate, as it was a big beat.

Although the inflationary aspect within the GDP report has sparked valid concerns, the month-on-month figures for January and February, when viewed through an annualized lens, may not necessarily foreshadow worse-than-expected data for tomorrow. Hence, there's a strong likelihood that the market has already priced in the worst-case scenario.

The primary concern arises if the worst-case scenario has not been adequately priced in and we witness a hotter revision. This could potentially lead to a scenario where rate cuts for 2024 are off the table—a situation that investors would undoubtedly find challenging to navigate.

Overall, the advance read on Q1 GDP indicates that the US economy is still resilient, albeit with signs of consumption moderating slightly. Additionally, it revealed a firming in underlying price growth, signalling a stall in disinflation progress.

As for a one-word description, "Goldilocks" doesn't quite fit the bill today.