Asia week ahead: Fed minutes and more

Fed minutes

The past week saw the Fed return as a major influence for the markets. The main focus of the market had been on Fed chair Janet Yellen’s testimony where she raised market expectations of a fast-approaching Fed hike. In her comments last Tuesday, Yellen highlighted that it would be ‘unwise’ to wait too long to raise interest rates against the backdrop of economic growth and accelerating prices. This briefly sent the USD index above $101.50, helped also by higher-than-expected inflation and retail sales data.

The dollar index later retraced the gains as expectations moderated. The week ahead sees new feeds coming in once again, primarily via the FOMC 31 January – 1 February meeting minutes release on Wednesday. The market is expected to tear down the minutes in search of clues of any imminent Fed hike. Views on President Donald Trump’s policies by the members would be taken into consideration. Notably, the Fed chair did remark this week that the economy’s ‘solid progress’ underpins the Fed’s drive in their decisions. This may reduce the volatility that any strong points the minutes could present.

Fresh views from the series of Fed members’ appearances in the coming week should not be discounted as well. Looking back at economic drivers, the market could find February Markit manufacturing PMI and January new and existing home sales to be key US indicators for the coming week.

Eurozone, RBA minutes and Asian indicators

Despite the broad risk-on atmosphere in the markets, we are still seeing gold prices remain supported in the week and this can be credited in part to Europe. The Eurozone has been seeing its own set of turmoil lately from upcoming elections. Meanwhile, Greece has also returned to join the lot in creating jitters in the markets. EU finance ministers will be convening once again on the Greek bailout on Monday and sentiment has not been high on a conclusion in the upcoming meeting.

Meanwhile, the Reserve Bank of Australia (RBA) will publish their February meeting minutes where cash rate had been left unchanged at 1.50% as expected. Post-meeting statement pointed to a committee contented with keeping rates unchanged in the near term, though minutes are expected to be studied for any tinge of intentions for further cuts. The International Monetary Fund (IMF) had previously urged the bank to further drop its rates.

For the local Singapore market, the key focus will be on the Budget 2017 release on Monday. After the Committee of the Future Economy (CFE) delivered their report on Singapore’s long term growth, expectations are set for a budget that could address both near term and longer term plans. This fiscal boost will be crucial in guiding markets in the coming week. Attention will also be on several data updates in the coming week from Japan, such as January trade data and February Nikkei manufacturing PMI. The Bank of Korea will be meeting on Thursday with no change in monetary policy expected.