Asian Stocks Rise, Dollar Falls as Inflation Eases and Rate Cuts Loom

Asian stocks climbed, and the dollar dipped on Monday, following a strong week for global equities due to improving U.S. economic outlook and easing inflation. Gold surged past $2,500 an ounce, and the yen's rise pressured Japan's Nikkei. Upcoming Federal Reserve actions point toward potential rate cuts.

Asian stocks edged up and the dollar slid on Monday after global equities experienced their best week in nine months. This surge was driven by expectations that the U.S. economy would avoid a recession and that cooling inflation would initiate a cycle of interest rate cuts. Consequently, gold prices soared past $2,500 an ounce for the first time, while the dollar weakened against the euro, and the yen's sudden surge impacted the Nikkei.

Federal Reserve members Mary Daly and Austan Goolsbee highlighted the potential for easing in September over the weekend. Additionally, minutes from the last policy meeting are expected to underscore a dovish stance later this week. Fed Chair Jerome Powell is anticipated to speak at Jackson Hole on Friday, with investors predicting he will acknowledge the rationale for a rate cut.

Barclays economist Christian Keller noted that while it might be premature to declare victory, the inflation scare that dominated policy discussions since the pandemic's price surge has significantly receded. While inflation is not quite at the 2% target, it is moving in the right direction. Futures are fully priced for a quarter-point rate cut and imply a 25% chance of a 50 basis point cut, with much depending on the upcoming payroll report.

(With inputs from agencies.)