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Next week’s FOMC policy meet likely to set stage for March rate hike

The United States Bureau of Economic Analysis is expected to release its gross domestic product (GDP) for the last quarter of 2016 on Friday by 13:30 GMT. We foresee that if it comes in above 2 percent y/y, could set the stage for next week’s FOMC meeting on February 1 to signal a Federal Reserve hike in March.

On the other hand, the U.S. President Donald Trump is also scheduled to unleash his budget proposals on February 6, which is widely expected to reveal the details which markets need to further propel Trump trades.

By mid-week, the broader market started to get past the protectionist overtures of US President Donald Trump after his inauguration last Friday. Trump’s decision to revive two pipeline projects with Canada helped to relegate trade war fears to trade tensions, reported DBS Bank in its report.

Markets are still giving Trump the benefit of the doubt. Beneath his tough talk, Trump has also revealed himself to be a leader that is not totally unreasonable or uncompromising, they added.

Lastly, the dollar index broke below 100 yesterday, just as the Dow Jones rose above 20K alongside a U.S. 10-year Treasury yields jumped above 2.50 percent. The DBS Bank in its report mentioned that it is premature to ascertain if this divergence is the start of a trend, though we cannot discount the fact that the USD can still correct further before stabilising.

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