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Risk-on returns with fading Fed rate hike prospects, a host of US data eyed

FXStreet (Mumbai) - Improving risk sentiment was the underlying theme in Asia after markets once again bought the renewed speculations surrounding delay in Fed rate hike following the latest poor US fundamentals, as good news. The entire antipodean complex rallied on their respective fundamentals while the USD/JPY is seen correcting higher around 119 handle.

Key headlines in Asia

Australian employment: Sept figures disappoint, full-time jobs fall

ECB's Constancio: Diverging Fed/ECB could have greater repercussions that in the past

Fed fund futures: Odds of March 2016 rate hike at 'coin flip' levels

Dominating themes in Asia - centered on JPY, AUD, NZD

The gloomy US retail sales and PPI data released on Wednesday further squashed hopes of Fed rate hikes this year and this news instead turned out be positive for the markets as the they cheer longer period of low-interest rates. As a result, the demand for riskier-assets was on the rise this session with the Asian equities snapping the recent losing-streak and posed a solid rebound, while the higher yielding/risk currencies such as the AUD and the NZD benefited the most.

Adding to the positive sentiment, the Australian macro data also turned out to be upbeat, thus boosting the AUD bulls. The decline in the participation rate from 65% to 64.9% helped keep the unemployment rate at 6.2% last month. While, improving inflation expectations in the country along with rising oil and gold prices also lifted the sentiment around the Aussie. However, the Aussie met through offers near the daily R1 and recedes from 0.7350 levels heading into late-Asia, to now trade near 0.7315 region, up 0.24% on the day.

The Kiwi was also strongly bid after NZ business confidence improved this month. The ANZ Consumer Confidence Index rose 3.7% in October to 114.9 points from 110.8 in September. NZD/USD rises 0.42% to 0.6818.

Meanwhile the Asian indices stage solid comeback, with the Nikkei rallying nearly 1.50% to 18,147. Australia’s S&P ASX index gains 0.62% to 5,229. While the Shanghai Composite index jumps 1.40% to 3,308. Hong Kong’s Hang Seng rockets 2.23% to 22,955.

Heading into Europe & the US

After an eventful EUR calendar yesterday, we have an absolutely data-dry upcoming European session.

Hence, attention now turns towards the North American session with a host of crucial US economic data lined up for release. WE have the US CPI, weekly jobless claims and Philly Fed manufacturing releases due later today.

While FOMC Member Dudley is due to participate in a panel discussion titled "The Fed at Crossroads: Where to go Next?" at the Brookings Institution, in Washington DC.

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