US equities surged again overnight with three major indices making new record highs. In particular, DJIA ended up 114.78 pts, or 0.58%, to close at 1991.21 and is set to have a test on 20000 handle. Treasury yields and Dollar, on the other hand, weakened mildly as markets prepare for FOMC rate decision. Fed is widely expected to raise interest rate by 0.25% to 0.75%. The accompany statement would likely sound non-committal to the rate path ahead. But there are anticipations of changes in the new economic projections. The so-called "dot-plot" could indicate that policy makers are forecasting faster rate hike in 2017. Indeed, fed fund futures are pricing in around 60% chance of another hike in June. However, policymakers could wait to see what president-elect Donald Trump's initial policies are, before making a change to their expectations. So, Dollar bulls could be disappointed.
Japan Tankan large manufacturers index rose to 10 in Q4, up from 6 and met expectation. That's the first rise in six quarters and a one-year high. Large manufacturer also improved to 8, up from 6, but missed expectation of 9. Non-manufacturing index was unchanged at 18, below expectation of 19. Non-manufacturing outlook rose to 18, up from 16, but missed expectation of 19. Large all industry capex rose 5.5%. The set of data suggested that sentiments have generally improved and that reflected recovery in global economy. And due to such improvements, the need for additional monetary easing by BoJ is reduced. Also from Asian session, Australia Westpac consumer confidence dropped -3.9% in December.
Looking ahead, FOMC rate decision is certainly the main focus of the day. But there are also a number of economic data to watch for. Swiss will release PPI and ZEW expectations in European session. Eurozone will release industrial production. UK will feature employment data. US will release retail sales, PPI, industrial production and business inventories later in the day.