Weekly Market Recap
Asia Pacific
17/06/2019
Week in review
Week ahead
- 18/06 – U.S. – Housing starts
- 20/06 – U.S. – FOMC meeting
- 20/06 – JP – BOJ meeting
- 21/06 – EU – Flash PMI
Thought of the week
The June FOMC meeting will begin on June 18, with an announcement on Wednesday night Asian time. We expect the Federal Reserve to keep the policy rate unchanged, but the key will be its indication of future policy moves in the second half of the year. The futures market is already pricing in over 75% probability of a rate cut in the July meeting. Chairman Jay Powell’s comments will be monitored closely for any indications of the Fed’s views and plans. The Summary of Economic Projections will also show if Fed members are swinging towards forecasting rate cuts later this year. The equity market may react positively in the near term on the prospects of lower rates. However, if rate cuts are brought by weaker growth, this would eventually hurt risk assets, including equities. Hence, we still believe a well-diversified portfolio entering the second half of 2019 would help Asian investors to handle uncertainties and volatility.
Chart of the week
Probability of interest rate cuts
Derived probability from fed funds rate futures