• Market sentiment improves amid receding hawkish bets on the Fed.
• S&P 500 Futures stays firmer, US Treasury bond yields remains depressed after snapping three-day uptrend.
• Downbeat US inflation raised concerns for softer rate hikes and favor riskier assets.
• Consolidation, headlines from China probe optimists ahead of the FOMC.

Risk appetite improves during early Wednesday as traders anticipate the Federal Reserve to announce softer rate hikes during today’s Federal Open Market Committee (FOMC) monetary policy meeting. The reason could be linked to the downbeat US inflation data, as well as hopes of economic recovery emanating from higher odds of the Fed’s pivot in early 2023.

While portraying the mood, the S&P 500 Futures print a three-day uptrend near 4,065, up 0.25% intraday, whereas the US 10-year Treasury yields decline one basis point (bps) to 3.49%, after snapping the three-day downtrend.

That said, the US Dollar Index (DXY) slumped after the downbeat US Consumer Price Index (CPI) that dropped to 7.1% YoY in November versus the 7.3% expected and 7.7% prior. Further, the CPI ex Food & Energy, known as the Core CPI, also declined to 6.0% YoY during the stated month compared to 6.1% market forecasts and 6.3% previous readings. “Traders of futures tied to the Federal Reserve’s policy rate boosted bets Tuesday that the U.S. central bank will notch down its interest-rate hike pace further early next year, after a government report showed inflation eased sharply in November,” said Reuters following the data.

It should be noted that the risk-negative catalysts surrounding China and the pre-Fed anxiety seem to restrict the market’s latest moves.

The International Monetary Fund (IMF) Managing Director Kristalina Georgieva was spotted expecting slower economic growth for China due to the latest jump in the daily Covid cases. Additionally, Bloomberg came out with the news suggesting that the Chinese leaders delayed the economic policy meeting due to the COVID-19 problems. On the same, the Asian Development Bank (ADB) cut China's 2023 economic growth forecast to 4.3% from the 4.5% estimate in September.

To sum up, global traders portray the typical pre-Fed anxiety as the latest Fedspeak contrasts the dovish bias and hopes of pivot during early 2023.

Also read: Fed December Preview: Will US Dollar selloff continue?