Key event risks ahead - Westpac

Analysts at Westpac explained the key risk events ahead.

Key Quotes:

"Australian inflation will be the main focus today given the release of the Q4 CPI. The 0.8% gain for the headline measure is expected to come from broadly equal contributions from tobacco; house purchase & utilities; fuel; and holiday travel. Annual headline inflation will remain contained at 2.1%yr, at the bottom of the RBA’s target range. The average of the core measures is expected to print at 0.5%, 2.0%yr. Competition in the consumer sector and near flat rental growth are enduring disinflationary forces.

Australian private credit is also due. We expect headline growth of 0.4% in December following a 0.5% gain in November. Housing credit is slowing gradually, while business credit remains volatile month to month; on the latter, after an outsized gain in November, we are due a softer print.

In Asia, the official PMIs are due in China. Both the manufacturing and services surveys continue to show robust momentum, aided by external and domestic demand. Employment remains an area to watch, given China’s growing reliance on the consumer.

For the US, President Trump’s State of the Union address will be delivered during the Asian session, 1pm AEDT. Market participants will be looking for detail on a potential infrastructure plan as well as any reference to further protectionist actions.

In our evening, the Q4 employment cost index (another solid rather than strong outcome) will be followed by the January FOMC meeting. Recent data and financial conditions warrant an upgrade on the outlook; though being Chair Yellen’s last meeting, the statement is unlikely to signal an absolute shift in the stance of policy. The market has already priced a March hike, so there is no need to signal intent."