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Asia Week Ahead: The first 100 days of Trump and Q4 GDP

The first 100 days of President Donald Trump commences and the market ushers in a new era with the new administration. 

US
Source: Bloomberg

The past week had probably been a sampler for what is to come as we saw the US dollar being bumped down at the start of the week from Trump’s comments, citing that the USD has been too strong. Prices later recovered with Fed Chair Janet Yellen bringing the attention back to US economic performances. This could be the struggle that we see going forward. The US dollar nevertheless retained mild declines week-to-date (WTD). 

On the other hand, the jawboning down of the US dollar by the President-elect certainly raised the market’s attention to the volatility that we may experience moving forward. With the imminent Presidential inauguration, indices were seen pulling back in the week. On the other hand, safe havens including JPY and gold have registered gains. The upcoming week holds several tier one data, but expect comments from the newly minted US President to steal the attention instead.

Weekly Market Movements- 20012017

Fourth quarter (Q4) growth

The upcoming week will see Q4 growth reports from several countries with US and UK likely to be in the limelight. For Asia, Q4 GDP from South Korea, Taiwan and the Philippines will be due in the week. Asian economies that have reported thus far, namely Singapore and China, showed growth rates that have beaten consensus, painting a brighter-than-expected picture for the region.

Focusing on the US, Q4 growth is expected to come in at 2.1% quarter-on-quarter (QoQ) in Q4 based on market consensus, moderating from a stellar growth rate of 3.5% QoQ in the third quarter. Although this would indicate a deceleration in growth, most likely without Q3’s soybean magic, a 2.1% QoQ growth rate would nevertheless point to healthy progress for the world’s largest economy. A realization of the above forecast would also translate to the overshooting of the Fed’s 2016 forecast at 1.9%. The USD index could receive a boost with surprises on the upside, though not to forget, the first week of President Donald Trump would also be open to policy introductions by the new administration.

Meanwhile the UK will be making known the first estimate of their Q4 GDP prior on Thursday. Fourth quarter growth could moderate slightly to 0.5% QoQ after two consecutive quarters of 0.6% QoQ growth. This would nevertheless be a resilient growth rate in the face of Brexit concerns. Tuesday’s Supreme Court rule on Brexit proceedings could however be of higher prominence for market movements with greater relevance on the outlook of the UK.

 

Asian indicators

Besides Q4 GDP prints, Asia would also see inflation rate updates from Singapore, Hong Kong and Japan. Japan’s December inflation rate is likely to have slowed from the November’s 1.5-year high but is expected to remain in growth buoyed by a weak JPY. Prior to the consumer price index (CPI) update on Friday, November’s all industry index and December’s trade balance will also be key data points for the land of the rising sun.

The local market will find December’s CPI and industrial production data due on Monday and Thursday respectively. While the inflation rate is expected to hold relatively steady at 1.2% year-on-year (YoY) for the month, high growth expectations remains for industrial production after the strong records in manufacturing PMI and NODX.

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