Fed likely to remain on wait-and-see mode over the months ahead; trade talks to continue swinging sentiment: Scotiabank

The Federal Reserve is expected to remain a wait-and-see mode in the months ahead. However, oil prices are likely to contribute positively to the US inflation in November and December this year by considering the base effect. At that time, the market will likely re-price the chance and direction of the Fed’s future rate adjustment, according to the latest research report from Scotiabank.

US President Donald Trump has softened his stance in a series of remarks expressing optimism about reaching a trade deal with China. In addition, Bloomberg reported Tuesday that US Treasury Secretary Steven Mnuchin may visit China soon and wants trade talks to continue, citing a senior Treasury official.

The official also said that US President Donald Trump is interested in meeting with Chinese President Xi Jinping at the upcoming G-20 Osaka summit set for June 28-29. To some extent, it has alleviated pressure on US stocks that rebounded moderately on Tuesday, the report added.

EM Asian currencies are expected to recoup some of their early losses on Wednesday, with trading tensions between the US and China diminishing somewhat. US President Trump told an audience in Louisiana that US growth would hit 5 percent "with a little quantitative easing," calling on the Fed to "match" what he said China would do to offset the impact of the trade war.

"We believe the trade talk headlines will continue swinging sentiment in the coming weeks, given the Fed’s patience on interest rates. We stay nimble and will trade EM Asian currencies accordingly for now, while expecting a US-China trade deal to be reached finally," Scotiabank further commented in the report.