Investors will examine the US Federal Reserve statement released on Thursday for indications of whether the central bank will live up to its promise of three rate hikes this year.
The outlook for higher growth and a bump in inflation under President Trump's anticipated fiscal stimulus policies has investors flooding into American stocks, has boosted the greenback since the November 8 election, and is causing economists to expect a more "hawkish" tone in the statement.
An overall pick-up in activity and a rebound in inflation in the world's advanced economies has reduced the need for the US Fed to increase its bond purchasing programs. That said, the market largely expects the central bank to keep interest rates on hold at its February meeting on Tuesday, as the Federal Open Market Committee digests the rapid executive orders coming out of the White House.
"There is still a huge amount of uncertainty about what policies Trump will pursue in the first half of the year," says Michael Pearce, global economist at Capital Economics, who points to changes in fiscal stimulus, healthcare reform and trade policy all having significant implications for inflation and therefore monetary policy.
"The Fed will therefore be content to leave policy on hold for the next few months while awaiting more clarity."
In other major central bank meetings this week, the Bank of Japan will meet on Monday and the Bank of England on Thursday.
With eyes still on the US, the earnings season is in full swing. The positive sentiment that has buoyed equities since the US election is further boosted by quarterly earnings lifting 7 per cent over the past year, the biggest increase in two years, according to Thomson Reuters.
Australia's earnings season kicks off this week, with Navitas and CYBG to report on Tuesday. A rebound in commodity prices over the last year is likely to see further upgrades in resource companies, but elsewhere results are likely to be mixed.
Overall consensus estimates anticipate earnings per share growth of 17 per cent.
The ASX is expected to open slightly lower on Monday, with SPI futures pointing to a 0.2 per cent or 11-point drop, after data on Friday showed US economic growth cooled last quarter, stalling US equities.
A flood of economic data this week will give investors plenty to think about. The Reserve Bank of Australia will release data on outstanding loans on Monday. For 14 straight months credit has grown by between 0.4-0.6 per cent a month and CommSec analysts expect a similar result in December, keeping annual credit growth at 5.4 per cent.
The National Australia Bank business survey and weekly consumer data are out on Tuesday, with consumer sentiment generally positive. Craig James, chief economist at Commsec, suggests keeping an eye on the indicator of inflation expectations, which is at a 4.5-year high.
On Wednesday the Australian Bureau of Statistics will release a breakdown of living cost estimates for different groups throughout the country, giving investors a better understanding of inflation direction. Following that, house price estimates for January will be released and available data is expected to point to a soft reading for capital cities.
On Thursday the ABS will release international trade and building approvals. In November Australia's trade balance improved by $2.362 billion to a surplus of $1.243 billion. A lift in coal and iron ore prices supported this reading, which was the first monthly trade surplus in 22 months. This commodity rebound, combined with higher LNG revenues, has economists tipping a surplus of $3 billion for December.
Lastly, US employment data will come out on Friday, alongside factory orders and reports of activity in the services sector. Wages rose by 0.4 per cent in December.
"If we see a similar sort of increase in January, policymakers may start worrying about potential inflationary pressures," says Commsec's Mr James. "And, as a result, the Fed may be more likely to lift interest rates."