Global equity markets ticked higher at the start of the week, buoyed by the positive sentiment following the smooth passage of the Senate’s tax bill. The commencement of the reconciliation of the House and Senate’s bills however proved opportune for profit-taking as we found week-to-date declines cutting across US and Asian markets.
Going against the tide had however been the US dollar as the USD index looks set to clock its best weekly gain in over a month, though Friday’s labour market update retains the last call. Interestingly, a look into the fresh week may find more reasons for the US dollar index to trek higher as we delve into the potential triggers.
Central bank meeting galore
A series of central bank decisions would arrive from advanced economies including that of the US Federal Reserve, European Central Bank (ECB), Bank of England (BoE) and also the Swiss National Bank (SNB).
Of the lot, the FOMC will likely capture the bulk of the attention, expected to deliver their last rate hike of the year and also serve up an updated version of their summary of economic projections. Having firmed up on the likelihood since late September, reactions towards the announcement may be next to none. The item that could hold an element of surprise would be the Fed’s summary of economic projections, one that looks primed for upward surprises in growth, potentially generating a lift for the USD by strengthening future rate hike expectations. Underpinning this likelihood includes the resilient economic figures and to a very small extent, the acceleration in tax overhaul pace raising the prospect of improved growth momentum. We would nevertheless have to note that the shuffle of voting members into 2018 could be a limiting factor for reactions.
Over and above the US monetary policy update, we would also find a splatter of US economic data including November’s consumer price index, retail sales and also industrial production to keep track of. Comparatively, the remaining central bank in Europe are not expected to produce any changes to monetary policy and the Brexit end of matters may invite greater focus as we thrive through crunch time of negotiations in the lead up to the EU summit.
Asia would also see monetary policy decisions arriving from the likes of the Bangko Sentral ng Pilipinas (BSP) and Bank Indonesia (BI), though in line with the BoE and ECB, no changes are expected from the above-mentioned monetary policy committees.
On economic data, Asia markets would likely react to China’s inflation data at the start of the week whereby a slack in the input price growth has been expected. The critical aspect will be how fast this slowdown may stand against the 5.8% YoY median consensus which could yield a reaction in regional bourses. China’s industrial production, retail sales and fixed asset investments will also be released on Thursday ahead of Japan’s Q4 Tankan numbers, or short-term economic survey of enterprises, on Friday. Economists have penned in another uptick for large manufacturers, which could provide USD/JPY and Nikkei 225 a push into the end of the week.