Good Week All:
The moment of truth beckons for the US Federal Reserve this week with the long awaited final FOMC meeting of 2016. This meeting has been identified for many weeks and months as the most likely for the Fed to again raise interest rates after a year long pause. With an interest rate rise virtually fully priced in the only real shock to the market is likely to occur if the FOMC fails to deliver on the expected rate rise. What could also add spice to the occasion is any reference to the projected path of interest rates in the US for 2017. It is largely anticipated that a further two rates rises are possible in 2017 so that any diversion from this could also add further intrigue to what has already been a most eventful year. There are a number of what would likely be key US data releases due this week, however, barring a complete undershoot on many of the data series we believe they are likely to have little impact on the Fed’s decision this week.
Australian GDP data disappointed last week suggesting a flatter yearly rate of growth and this will no doubt be referenced again in the lead-up to next week’s mid-year economic review by the Treasurer Scott Morrison. Unemployment and jobs data is the key data announcement in Australia this week and it is possible that the ever-whippy data series could yet again surprise. The employment figures will be book-ended by the MI Inflation Expectations and the RBA Bulletin as well as being considered in light of the US Fed decision in the early hours of Thursday. The AUD has been trading on a relatively steady track against the USD over the past week (opening the week around 0.7450) and we are anticipating that this trend will continue in the lead up to the Fed announcement. Chinese Industrial production figures on Tuesday may have some bearing on currency markets although it is hard to really focus on anything this week other than the long-awaited Fed decision.
New Zealand data this week is focused around manufacturing figures although the big story of the week will be who succeeds John Key as Prime Minister following his unexpected resignation last week. Key’s former deputy and Finance Minister Bill English is widely anticipated to be voted into the position by his parliamentary colleagues at Monday’s meeting. We are expecting that should this occur little will change for the NZD this week as it will be construed largely as a “business as usual” outcome.
There will be a raft of euro zone data due for release this week with employment, CPI , industrial production, manufacturing and services PMI as well as trade balance data due for release. Political intrigue continues to remain across Europe with the resignation of Italian Prime Minister Matteo Renzi following the “no” vote in last weekend’s constitutional referendum. The Greek parliament has also approved (narrowly) its 2017 budget that predicts a strengthening economy as well as the imposition of a wave of austerity measures demanded by its bailout partners.
The Bank of England is also scheduled to meet this week for its final 2016 session. It is hard to view this in isolation of the impending Brexit machinations in what will continue to dominate discussion throughout the lead-up to the possible March trigger. The Bank of England quarterly bulletin could also make for interesting reading on Friday when viewed through the lens of ongoing strain between its Governor Carney and Prime Minister May.
Japanese data will be released throughout the week with the highlights being Tankan manufacturing and non-manufacturing indices on Wednesday. It will also be interesting to watch the JPY this week ahead of the US FOMC meeting decision.