This follows a week of indecision within markets with prices largely seen locked by the mixed sentiment stemming from the abovementioned factors.
There appears to be a significant amount of anticipation packed in for the Federal Open Market Committee (FOMC) meeting next week, the first meeting where we would likely see an interest rate hike take place. The CME FedWatch tool currently places the likelihood of a 25 basis point hike at 91.6%, one fully worked in for the markets. The key would however be with the Fed’s forward guidance with items ranging from Fed Powell’s press conference, the summary of economic projections and the ‘dot plot’ of which reflects any changes in the Fed’s outlook. Hawkish comments have been put forward by Fed Chair Jerome Powell earlier in his testimony to Congress and it is little wonder with the upside surprise in January’s inflation readings and the recent push through of fiscal stimulus inducing optimism. The question would be how that would work out on average within the committee and the market’s expectation on how much would that translate to further hikes down the road. The slowdown in February’s inflation growth have so far tamed some expectations, though any hawkish surprise may still send a shockwave through markets, the key to watch next week.
Trade concerns linger
As US’ steel and aluminium tariffs look set to kick into place next Friday, the market had certainly been mulling the likelihood of additional announcements. Alongside the whirlwind of personnel changes in the White House, President Donald Trump have also made clear of his focus on China as reports surfaced that more measures may be brought upon the country. It had not helped with the President’s new free-trade advocating economic adviser adding his tough stance on China in his first public appearance. Over and above expectations of these announcements, the plausibility of retaliation is also very real. While this event is one with no fixed timeline, the heating up of the discussion may very likely see the market sentiment waver accordingly.
Against the current indecision within markets from what seems like an equilibrium between risks and opportunities, the above-mentioned items will be crucial in leading prices across US and the Asian region as the case had been in recent sessions.
Adding on to the two key themes above, we certainly have a slew of central bank meetings including the central banks in the UK and New Zealand though no changes in monetary policy are expected. Early March Markit Purchasing Managers' Index (PMI) numbers for both the Eurozone and US will also be released on Thursday for the monthly insight into the manufacturing conditions in the regions.
For Asia, a couple of tier-1 indicators will be seen including Japan and Singapore’s inflation on Friday. The Asian hours would also see the closing of China’s National People’s Congress on Tuesday with speeches from the President and Premier. This comes after the appointment of a new People’s Bank of China governor, one to watch for the market.