Asia week ahead: Jackson Hole Conference, CPI updates

Sentiment was shown to be a key driver for market movements in the past two weeks, rocked by jitters surrounding North Korea and later US politics. 

Federal Reserve
Source: Bloomberg

The week ahead is expected to find the annual Jackson Hole Policy Conference being the anchoring event for markets which could shine some spotlight upon monetary policy.

Market recap

With the US market currently on one of its longest bull-run, any rocking of the boat certainly seems to deal a noticeable impact upon prices and global market confidence. Receding jitters over North Korea at the start of the week had helped global markets up, only to see it give way once again due to concerns surrounding politics in the US. The turning of sentiment had brought US markets down with the S&P 500 and Dow Jones seeing their worst drop in over 3-months. While it would be difficult to look into the crystal ball to anticipate the streaming in of such events and their respective market reactions, with the events on hand, we may find the focus turning towards monetary policy in the week ahead.

Jackson Hole policy conference

The annual Jackson Hole economic symposium, organised by the Kansas City Fed, will be held between the 24th and 26th of August with central bankers and finance ministers to boast as attendees. Insights into concerns by policymakers and policy options have traditionally been the key focal point for markets with past Fed chairmen having used the event to direct a shift in policy.

Post this week’s release of minutes from the Federal Open Market Committee (FOMC) and the European Central Bank (ECB), we can see that markets remain fairly sensitive towards monetary policy despite geopolitical turmoil clouding sentiment. The revisiting of dovish sentiment from the Fed minutes and the highlight of concerns over euro strength in the latest ECB minutes have dealt an impact on the respective currencies. The USD index was knocked strongly off its trade above 94.00 and the EUR/USD declined despite USD weakness on Thursday.

While expectations for deeper insights into the ECB thoughts have been tamed with reports that no fresh policy directions will be provided by President Mario Draghi, the market will be watching the US Fed closely. Any concurrence with New York Fed President William Dudley on seeing another rate hike this year could send market repricing USD pairs and equities alike. This impact upon markets will likely drift east to Asia as well.

Ahead of the economy symposium, flash Markit PMI figures will be due for the US, Europe and Japan, one to keep on the radar.

Asian indicators

A relatively light week is expected for Asian markets in the week ahead with primarily inflation updates to look out for. Japan, Singapore, Hong Kong and Malaysia will shed light on their respectively inflation conditions for the month of July with mixed expectations cutting across the Asia region. Specifically for Japan, there are expectations for core inflation to accelerate even as headline inflation growth stay stagnant and ensuring USD/JPY reactions will be noted.

Thailand’s Q2 GDP numbers will also be due ahead of the Bank of Indonesia’s monetary policy decision on Tuesday with no change in interest rates expected. The local Singapore market also receives a fresh installation of industrial production numbers for the month of July with a slowdown in growth expected. Watch also for a series of earnings due in the Hong Kong market to drive movements for the local bourse. 

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