Asia Weekly: What Asia investors need to know for the week ahead

Market Analysis /
17 Sep 2019

The Federal Open Market Committee (FOMC) rate decision on Wednesday will be the global markets focus of the week. Currently, the market is pricing in a long-held, and unanimous view for a cut in the Fed Funds rate by 25bps to between 1-3/4% and 2%. The FOMC meeting will happen on Sept. 17-18.

However, as usual, much focus will be on the following press conference by Chair Powell, where market participants will focus on how the Committee signals the potential for future actions and whether the Federal Reserve Board ( Fed ) shifts its narrative from a tentative 'mid-cycle' easing to one closer to the markets dovish expectation.

Barring any real surprises, the week's data leading up to the FOMC meeting should do little to sway market expectations for Wednesday's outcome.

AxiTrader Economic Calendar

 

Key dates and events on the ASEAN Docket

The unwind of the bearish price action from over the summer has been nothing short of frantic with the S&P 500 back to within a stone's throw of all-time highs; while core yields have been selling off. USDCNH is now within earshot of the critical 7.0USDCNH level. Moreover, the JPMorgan GBI-EM Index has pared most of its losses from late July, all of which suggests the market believes we are past peak tariff.

While the direction of travel makes sense but is the pace running too far ahead of the economic realities? Let us see if we can find some answer in this weeks Asia economic calendar

Much of the higher frequency data out of China this week is of the backwards-looking variety suggesting the market may continue to focus on developments of the US-trade negotiations to assess their growth and rates view beyond this quarter. And, with the Fed rate decision on September 18 hogging the lions share to the limelight, market participants may only give a cursory glance to Monday so-called "China Data Dump, yet it will still provide market participants with a valuable evaluation of trade war carnage.

 

Chart of the Week ahead

Asia’s key bellwether USDCNH

September 19

 

A host of regional central bank will deliver a policy response after last week, the European Central Bank (ECB) provided the kitchen sink.

Indeed, the dovish ECB and an expected Fed interest rate cut will offer regional central banks more policy wiggle room to trim interest rates

  • Central Bank of China (CBC, Taiwan) is widely expected to keep policy rate steady but could align forward guidance to meet the market expectation of a 12.5bps rate cut by year-end, however much of that debate may fall on how fair trade war winds blow between now and then.
  • Bank Indonesia (BI) is expected to deliver another 25bps policy rate cut when it meets on September 19, one day after the Fed. BI has turned explicitly more dovish since last month's cut and is likely to do most of the heavy lifting in support of growth, given limited 9space
  • The Bank of Japan (BoJ) is expected to continue to lean dovish, but given the recent smoke signal from Tokyo, The Bank of Japan is growing more open to the idea of cutting short-term interest rates, so in a departure from past BoJ meetings in 2019, this upcoming policy decision could be a market-moving event.

 

Expanded ASEAN Calendar

Read more market views from Team AxiTrader: https://www.axitrader.com/int/market-news-blog/.

 

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