Asia week ahead: Fed FOMC, NFP

Currency and trade concerns rose to the forefront for a week that commenced with a focus on monetary policy.

Source: Bloomberg

This sets the tone for politics to remain in the spotlight, even as we step into a week packed with key data releases and the first Federal Open Market Committee (FOMC) meeting of the year.

A chock full of data

Despite the acceleration in US dollar weakness registered since the start of the year, the past week had only seen the pace picking up. This week would likely find the US dollar index end its sixth consecutive week in red and likely with the sharpest drop in all six weeks. The repercussions for both equity and commodity markets had been felt despite the broadly positive fundamentals. With the Fed FOMC meeting, December’s non-farm payrolls and a slew of other data releases up ahead, the US dollar’s trajectory will be an interesting study next week.

Chronologically, the items that are expected to keep the markets hooked next week includes President Donald Trump’s State of the Union address on Tuesday, ahead of the Fed FOMC’s Wednesday conclusion and Friday’s labour market updates. While we have yet to hear from the President at the Davos congregation, the market is certainly looking ahead to the State of the Union address. Traditionally, an avenue for the President to deliver budgetary and economic reports and also to highlight priorities, the upcoming address may be taken with a pinch of salt given the fast-changing nature of the current administration. Mentions of upcoming reform plans and trade views would nevertheless be items for the market to note.

On the Fed meeting, no policy changes are expected in Fed Chair Janet Yellen’s last meeting as the head of the central bank. In fact, few are expecting market moving pieces to be present, making for the consensus that this is likely to be a non-event. The key draw may instead be Friday’s labour market data where January’s non-farm payrolls (NFPs), unemployment and wage inflation readings will be announced. Tight labour market conditions are expected to retain, where a median consensus of 185k job additions had been penned in, which could make the case for some USD bids should we find surprises. Ahead of which, December’s core Personal Consumption Expenditures and January’s Institute of Supply Management manufacturing updates are also items due. The Eurozone also reports Q4 GDP and consumer confidence on Tuesday. Find out more about how NFPs affect traders.

Asia indicators

Into the end of the week, we have certainly found Asian markets coming under pressure as concerns of a cross-pacific trade war weighed in. Nevertheless, little changes may be said of the fundamentals that had helped to drive the MSCI Asia Pacific index to a fresh record high this week. The start of the new month welcomes the seasonal Purchasing Managers Index (PMI) numbers from China as the official and Caixin manufacturing figures arrive on Wednesday and Thursday respectively, offering an update on Asia’s manufacturing engine. The current consensus points to resilient expansionary conditions, unchanged from the previous month, one to be confirmed.

In addition to the abovementioned, Japan’s retail sales and employment, GDP updates from Taiwan and India are just some of the remaining items that will be watched for Asia markets. For the local Singapore bourse, January’s PMI comes only after the market closes on Friday. With prices finding resistance ahead of 3620 on the STI, next week’s earnings will play a part too in guiding price action. Approximately 21% of the companies on the S&P 500 index reports, alongside the STI’s CapitaLand Ltd.

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