General market tone: Risk-on.
Risk sentiment is seen to dominate Thursday with Powell turning dovish overnight. Traders will look to Fed minutes tonight and the G20 meeting on Friday for further direction
Sentiment towards emerging markets has improved substantially in recent weeks. But central banks in Indonesia and the Philippines are likely to remain hawkish to prevent their currencies from depreciating too much next year
Concerns about the US-China trade war have subsided somewhat after President Trump said earlier this month that he'd had a "good conversation" about trade with China’s Xi Jinping and discussions are "moving along nicely". Meanwhile, the threat of a hawkish Federal Reserve has faded somewhat with dovish commentary from Fed Vice Chair Richard Clarida and lacklustre economic data suggesting that the global economy is slowing. Oil never threatened to hit $100/barrel and is now down 7.98% with Dubai crude trading at $58.74/barrel as the US sanctions on Iran were somewhat nullified after eight US allies were granted a six-month waiver to continue importing oil from Tehran. Sentiment towards emerging market currencies has improved dramatically since November.
Suddenly all seems to be good for risky assets despite an increasingly dovish tone on the global growth outlook in 2019. The most lingering questions are: will the Fed really pause tightening, the UK stay in the EU, and oil price hold on to its current low level?