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U.S. CPI showed early signs of inflationary tariff effects

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Fed's Powell had predicted tariff impact to emerge in the

summer

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Traders price in 43 bps of Fed cuts for remainder of 2025

By Kevin Buckland

TOKYO, July 16 (Reuters) - Asian stock markets were

under pressure on Wednesday while the dollar climbed to its

firmest against the yen since early April, after U.S. inflation

suggested tariffs are pushing prices up, dampening expectations

for Federal Reserve policy easing.

U.S. Treasury yields ticked to the highest in more than a

month, lifting the dollar against the yen in particular.

However, tech shares remained resilient following a 4% rally

in artificial-intelligence darling Nvidia ( NVDA ) overnight.

Brent crude continued to hover around $69 per barrel.

Data on Tuesday showed U.S. consumer prices rose 0.3% in

June, in line with forecasts, but the largest gain since

January. Economists attributed the rise in prices across goods

such as coffee and home furnishings to the Trump

administration's escalating import tariffs.

The Fed has been keeping interest rates steady as it has

waited for indications of the inflationary impact from tariffs,

which Chair Jerome Powell had said he expected in the summer.

"We know the revealed preference of Fed Chair Powell, along

with a few of his colleagues, is to wait for these tariff

impacts to come through, and those in that camp are seeing that

view bolstered by this data," Taylor Nugent, senior economist at

National Australia Bank, said in a podcast.

As a result, markets saw "a fairly significant trimming of

Fed expectations" for rate cuts, Nugent said.

Traders currently price in 43 basis points of rate

reductions for the rest of this year, with 56.5% odds of a

quarter-point cut in September.

Investors will now carefully monitor producer price data due

later on Wednesday, looking for signs of whether inflationary

pressures are also building on the factory floor.

Australia's equity benchmark South Korea's KOSPI

each lost around 0.6% as of 0127 GMT. Mainland Chinese

blue chips slipped 0.1%.

Japan's tech- and exporter-heavy Nikkei was flat

after alternating between small gains and losses, supported by

both Nvidia's ( NVDA ) fortunes and the weak yen.

Taiwan's benchmark added 0.5% and Hong Kong's Hang

Seng jumped 0.8%, adding to Tuesday's 1.6% tech-driven

rally.

U.S. S&P 500 futures eased 0.2%, after a 0.4%

decline for the cash index overnight.

Beyond the Fed and U.S. President Donald Trump's tariffs,

the earnings season is another focal point for investors.

Results from JPMorgan Chase ( JPM ) and Citigroup ( C/PN ) beat

expectations, but were met with a mixed market response. Wells

Fargo ( WFC ) cut its 2025 net interest income guidance even as

it beat second-quarter profit expectations.

Bank earnings due on Wednesday include Goldman Sachs, Morgan

Stanley and Bank of America.

U.S. 10-year Treasury yields rose as high as

4.495% on Wednesday, the highest since June 11.

The dollar stuck close to a multi-week high against major

peers. The dollar index was little changed at 98.545

after rising as high as 98.699 on Tuesday for the first time

since June 23.

The U.S. currency was steady at 148.785 yen, and

earlier rose to 149.04 for the first time since April 3, in the

aftermath of Trump's "Liberation Day" tariff announcement.

The euro edged up 0.1% to $1.1612, trying to pull

away from Tuesday's three-week low of $1.1593.

Cryptocurrency bitcoin added about 1% to $117,696, as

it stabilised following its 6% pullback earlier this week from

Monday's all-time high at $123,153.22.

Gold added 0.3% to around $3,332.

Brent crude futures fell 5 cents to $69.16 a barrel,

while U.S. West Texas Intermediate crude futures declined

9 cents to $66.89 a barrel. Both contracts settled more than $1

lower in the previous session.