Week Ahead FX outlook:
Key FX views:
China’s Central Economic Work Conference (CEWC) was held in Beijing from 10-11 December. The tone for next year's economic work is consistent with the December Politburo economic meeting held earlier that week on 8 December and largely continuing the overall tone of last year's CEWC, including calling for "increasing counter-cyclical and cross-cyclical adjustments" and continuing to implement a "more proactive fiscal policy" and a "moderately loose monetary policy." The policy stance of this CEWC is positive, however, amid a potential continued debt reduction and pursuit of fiscal sustainability, we expect an only moderately increased fiscal support in 2026, to deliver a moderate recovery of Chinese economy in 2026, up from current cyclical trough of Q4. Having said it, the tone on monetary policy is a bit more positive than anticipated, as the conference mentioned to regard “promoting stable economic growth and a reasonable recovery in prices” as an important consideration of monetary policy, and “flexibly and efficiently utilize various policy tools, such as reserve requirement ratio cuts and interest rate cuts, to maintain ample liquidity."
Next week, Asia’s economic landscape next week is shaped by central bank actions and fresh data releases. The Bank of Japan is expected to raise rates, supported by strong business sentiment and persistent inflation; in Southeast Asia, we expect Thailand to cut policy rates in response to sluggish growth and tourism, while we see Bank Indonesia cutting its policy rates to support growth; Taiwan’s central bank likely remains on hold thanks to robust exports fuelled by the global AI boom. China is to publish its key November macro numbers, we expect another set of weak consumer demand and investment data, while some resilience in industrial production due to exports recovery. Attention will also turn to India PMIs, HK unemployment, Singapore exports, and etc.
Chinese assets and CNY have some modest support on stimulus and policy signals from the politburo and central economic work conference
