This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
It will, however, also bring alongside a set of questions on the path of future rate hikes for the most watched central bank at the moment.
Probabilities of a 0.25% boost for lending rates for March 14-15th Federal Open Market Committee (FOMC) meeting was last seen emerging at 100% and 88.6% based on Bloomberg and CME FedWatch Tool calculations respectively. This anticipation has helped to build up USD strength in the week, most prominently in USD/JPY, which saw a break above the $115.00 level on Friday. Equities, meanwhile, had a mixed week.
Moderation of sentiment was seen in US markets while the Asian region balanced between gainers and losers. The plunge in crude oil prices midweek had placed a huge weight upon the shoulders of energy stocks, dragging down global indices.
Of central bank meetings
The upcoming week will be a huge one for central bank meetings. Besides the Fed FOMC meeting, the Bank of Japan (BoJ), Bank of England (BoE) and Swiss National Bank (SNB) are all expected to convene and decide on monetary policy. No change has been expected for rates except for the Fed.
The last piece of the puzzle is expected to fall into place in the form of today’s non-farm payrolls (NFP) data, after the private ADP employment change report surprised significantly on the upside. Fed officials have been growing increasingly hawkish in their statements lately, drumming up the expectations for a March hike. What could surprise the market at this moment would be the absence of the lift in rates.
However, extreme scenarios aside, the focus for the market would likely be on how the Fed shape the rhetoric around the path for future rate hikes. This would be a key interest for markets given the backdrop of the three month gap between the last and the next expected hike, accelerating significantly from the prior one year gap. The summary of economic projections to be released alongside the monetary policy decision is expected to be a point of interest. The likes of USD pairs and US indices still has room to be lifted should we find the Fed ushering a hastened pace for upcoming rate hikes.
Notably, President Donald Trump’s first budget outline will also be due next Thursday before a full budget in May and we may get to hear more from the White House in the coming week on spending plans.
Besides the BoJ meeting, we are also seeing data updates primarily on industrial production from the Asian region. This will be for countries including Japan, Malaysia and China.
In line with the past year, China’s industrial production and retail sales data will consist of an update for both the first two months of the year, thus eliminating the concern of the Lunar New Year distortion. The market is currently expecting both retail sales and industrial production growth to accelerate, potentially providing upward pressure for regional markets.
The local Singapore market will also see February’s non-oil domestic exports data on Friday and economists have forecasted an acceleration in growth rate for this piece of data, trending alongside South Korea and Taiwan.