Asia market week ahead - Fed FOMC, Asia central bank meetings

Market recap: Brexit, Trump-Xi meeting delay

A week perhaps dominated by Brexit saw the successive votes emerge as expected whereby the UK parliament eventuated on the decision for an extension of the March 29 deadline. As widely noted, with this being a non-legally binding conclusion, the blessing from EU 27 members would still have to be sought. Prime Minister Theresa May certainly looks to be attempting that with another vote for her draft deal prior to the Thursday EU council meeting, which as we know had been twice flopped. The event risks going into the fresh week would centre these items particularly for the pound. GBP/USD saw most of its gains arriving this week from Prime Minister Theresa May’s refresh of the draft deal and the vote against a no-deal Brexit. The same few scenarios nevertheless lie on the table including the plausibility of a no-deal Brexit should an extension be rejected. Amid the Brexit case complexities, watch the developments next week for trade.

Meanwhile on US-China trade, there had perhaps been little updates beyond the news of a delay expected to the previously anticipated end-March Trump-Xi meeting. President Donald Trump noted further news would arrive in three to four weeks suggesting a vacuum for the coming week that could set markets to continue idling on this issue. The passage of the new foreign investment law in China does however show signs of further amenable actions from the country. Whether this would translate to further progress for an eventual trade resolution remains to be seen. Alongside the details released on the tax cuts from the Chinese government, however, we have had markets taking a cheerier tone into the end of the week.

March Fed FOMC meeting

Moving into the fresh week, central bank meetings will be in abundance, though none will rival the Federal Open Market Committee (FOMC) meeting in importance. No changes to interest rates are expected for the Fed’s March meeting. However, this projections-accompanied meeting will be of utmost importance in shedding light on the Fed’s thoughts for the upcoming rate hike trajectory.

In light of the weaker year-to-date showings in economic data and muted inflation figures, the data-driven Fed may well take on a more dovish stance. How significant this is, would be reflected in the Fed’s Summary of Economic Projections and the ‘dot plot’ on views towards interest rates. Following January’s FOMC statement outlining the Fed’s consideration of an early balance sheet run-off halt, the market will also be anticipating an announcement. Although this may well be delayed to a later meeting. Any early announcements, such as what the European Central Bank (ECB) did with their targeted longer-term refinancing operations (TLTRO), would be bearish for the greenback. The bigger risk, however, would be any continued showing for the median near-term 2019 interest rates to be more than one 25 basis points hike. This could once again lead to concerns from the market on further tightening of economic conditions, one to watch.

Asia central bank meetings and indicators

Besides the Fed, a wave of Asia central banks is also set to decide rates next week. This includes central banks across Thailand, the Philippines, Indonesia and Taiwan. In line with the Fed, no changes are expected across any of the abovementioned central banks. Domestic markets would nevertheless be watching for the tone adopted and any projections updates seen.

Key data to watch during Asia hours includes that of Australia’s February employment reading on Thursday and Japan’s February CPI numbers on Friday. The preliminary Markit PMIs will also be released on Friday.

For the local Singapore market, February’s non-oil domestic exports (NODX) would be key next week and the few remaining pieces of data releases prior to April’s Monetary Authority of Singapore meeting. Trailing the weak trade numbers out of China last week, February’s NODX could be one to remain watchful of on Monday. As far as prices have gone on the STI, it had been this bearish momentum undercutting the consolidating prices. Look to whether prices would breach the 3183 support to a lower level of consolidation with any disappointments.