Asia week ahead - Fed FOMC week
Between the on-going trade tensions and expectations of Fed support, global equity markets had not fared too badly in the past week. That said, all eyes will be on the Fed as they meet next week to provide guidance for markets.
FOMC meeting in view
The biggest event in the coming week for global equity and FX markets alike may be of little doubt the next Fed meeting. With the market currently pricing in two and a half 25 basis points (bps) rate cuts by the end of 2019, the expectations are rife for the Federal Reserve to reflect that dovish views in the upcoming meeting. This also follows a series of data showing the deteriorating economic conditions for the US, including the latest non-farm payrolls addition, showing the slowing of hiring in the US in May.
For a meeting where both the summary of economic projections and dot plots will be expected, there are an assortment of channels in which the Fed’s dovishness can be made apparent. The post-meeting statement is expected to do away with the ‘patient’ stance to reflect Fed chair Jerome Powell’s latest view that the Fed stands ready to act to sustain the economic expansion in the US. Likewise with the projections, the Fed may pare back on their forecasts for core PCE and GDP for 2019. The Fed’s dot plot meanwhile may somewhat disappoint as it is expected to fall short of the market’s view for the two and half cuts and potentially reflect a mere one 25bps cut by end-2019.
Ultimately, alongside the press conference with Fed chair Jerome Powell, it will be about how likely the meeting itself will match the market’s view that an ‘insurance’ cut could take place in the following July meeting. Other releases out of the US that could matter in the week will be largely on the housing side, such as the housing starts, building permits and existing home sales. US and the eurozone’s Markit manufacturing PMI will also be released at the end of the week. Bank of England and the Bank of Japan also meet in the coming week though no changes are expected from either central bank in terms of monetary policy.
On markets, following Fed chair Jerome Powell’s pivot last week, the market had largely been pricing in this expectation. Therefore, any less than dovish interpretations could see to another turn for both US markets and the greenback alike, though unlikely. This is particularly so for the US dollar seeing the tilt with the surge in bearish bets against the USD last week according to the CFTC commitment of traders’ report.
Trump-Xi meeting, to meet or not to meet?
While there are no specific events to look out for on US-China trade in the coming week, expect the scrutiny to remain with the matter as we are fast approaching the June 28-29 G20 meeting. As White House officials and President Donald Trump himself had noted, increased tariffs will be on the horizon should a meeting between the two Presidents fail to materialize and President Trump had made clear his interest to convene. The ball currently resides in China’s court, but the authorities’ continued extension of the hard stance and economic support to the economy both reflects the resolute, dimming the outlook on the matter, one to watch for the fragile markets.
The abovesaid will be of key for Asia markets that continue to sway to the direction the trade tensions winds blow. While China’s data had been a relatively mixed bag thus far for the month of May, the upcoming week will see couple of central bank meetings in the region to track the monetary policy stance from these countries. This includes Indonesia, the Philippines and Taiwan. No changes are expected in rates but tailing the Fed meeting, a more dovish stance may likewise be detected.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 30
- The only provider to offer 24-hour pricing
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.