Christmas is getting closer, but market participants will remain on the edge of their seats for another relatively busy week. The BoJ policy meeting and the RBA minutes take center stage, while the US tax plan vote and the Catalan elections could also attract attention.
This week starts on a quiet note in terms of economic news and data releases. We only get second tier economic indicators, of which the only worth mentioning is Eurozone’s final CPI for November. As usual, the final prints are expected to confirm the preliminary estimates, so the market reaction is likely to be muted if this is the case.
On Tuesday, during the Asian morning, we get the minutes from the latest RBA policy decision. At that meeting, RBA officials decided to keep policy unchanged, but the statement accompanying the decision had a fairly more optimistic narrative than the previous one. Policymakers removed the part saying that inflation is likely to remain low for some time, while with regards to the Australian dollar, they excluded the part saying that the higher exchange rate is expected to contribute to continued subdued price pressures, and instead noted that it remains within the range that it has been over the past two years. Having all these in mind, we believe market participants will go through the minutes in order the get more clues with regards to whether officials have been indeed less concerned about the level of the exchange rate. Having said that though, following last week’s surge and bearing in mind that the Aussie is now trading at levels higher than it was back on the 7th of November, when officials expressed concerns over it, we believe that the minutes may be outdated and not representative of the current thinking of the RBA. If AUD/USD continues to strengthen, we believe that the concerns may return in the 1st statement of 2018.
Read the full financial markets weekly outlook on JFD Research.