The ASX200 looks set to build off last week’s 1.6% gain on Monday after a strong session for US on Friday night.
It followed a sharp fall in bond yields — benchmark US 10-year yields dropped 5 basis points to 2.87% — after the US Federal Reserve’s twice-yearly report to Congress.
Markets are currently pricing in just under three interest rate hikes in the US this year, and the Fed’s report gave no indication that it plans to quicken the pace of tightening at this stage.
The US dollar index edged higher off its recent lows, and the AUD traded flat to end the week at 0.7838 US cents.
The UK pound and Canadian loonie had the biggest moves, as Theresa May secured party consensus for Brexit trade negotiations while Canada inflation rose more than forecast.
Looking ahead, a quieter week of domestic data will be led by Thursday’s release of private capital expenditure for the December quarter — which will provide an update on the outlook for business investment.
Internationally, markets will be focused on new Fed Chair Jerome Powell when he testifies before US Congress on Wednesday night.
There’s also US personal income and expenditure data for January on Thursday night, which includes PCE inflation data — the preferred inflation measure of the US Fed.
Thursday’s Q4 capex data will get some attention, given that policy makers have cited the prospect of increased business investment — particularly among non-mining companies — as an important contributor to near-term economic growth.
It follows a solid print for the September quarter, which showed non-mining investment rose by 1.5% while companies also upgraded their spending forecasts for the 2018 financial year.
Also on Thursday, CoreLogic will provide its broader housing market update with monthly house price data for February.
While auction clearance rates have picked up, weekly data shows house prices continue to fall across the country. Despite that, debt is still rising faster than incomes and ANZ thinks more macro-prudential restrictions may be on the way.
Here’s the full domestic calendar this week (via ANZ):
The US has January trade balance data on Tuesday night, with the market forecasting a deficit of $US72 billion.
It may get more attention given the narrative around the negative effect of “twin deficits” — both the trade balance and the US federal budget — weighing on the US dollar.
Then on Wednesday night the Eurozone reports preliminary inflation data for February, with annual core inflation growth expected to come in at 1%.
Also on Wednesday night, all eyes will be on Jerome Powell’s testimony before US Congress.
It will mark Powell’s first major appearance as Fed Chair, giving markets an opportunity to assess his outlook for monetary policy amid a backdrop of solid economic growth.
Then on Thursday the US has PCE inflation data for January, with annual core inflation forecast to rise by 1.5%.
Here’s the full international calendar (also via ANZ):
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