28 January, 2016
FX News Today
FOMC obviously left the funds rate range unchanged at 0.25% to 0.50%. It downgraded the outlook on growth and inflation slightly, tacitly acknowledging the various risks that have cropped up since the last meeting. But thestatement wasn’t necessarily as dovish as the markets had hoped. The statement did repeat that global economic and financial developments are being closely monitored. The labor market continues to improve though net exports and inventory investment slowed. Of note, the Fed dropped the phrase that it is “reasonably confident” that inflation will reach the 2% target over the medium term. And it left out the balance of risks. The tone of the statement did not take a March hike off the table (that wasn’t really going to be the case) and it gives policymakers leeway to hike again in March. The vote was a unanimous 10-0.
Reserve Bank of New Zealand held rates at 2.50%, matching widespread expectations. However, they took a dovish tact, saying “Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range.” The evolution of the economic data is key, with the bank concluding “We will continue to watch closely the emerging flow of economic data.” Recall that in December, when the rate was cut 25 bps, Wheeler was more balanced, saying the bank’s inflation objective could accomplished at the current (2.50% ) rate setting, while also assuring the bank will reduce rates further if needed. As for the New Zealand dollar, he opines that “A further depreciation in the exchange rate is appropriate given the ongoing weakness in export prices.”
Possible Russian coordination with OPEC was discussed at a meeting with Russian oil companies, according to a Reuters report citing the Russian Energy Ministry, which was related to unfavorable oil prices. There were similar noises yesterday about Iraq and Russia, but this seems to be adding amplitude to the oil rebound now and helping putting a bid in equities and dollar-yen.
Main Macro Events Today
German Prel Jan HICP is seen rising to 0.4% y/y from 0.2% y/y, mainly due to base effects. This is likely to be mirrored by a similar rise to 0.4% y/y in the overall Eurozone number tomorrow. Still very low levels and far below the ECB’s definition of price stability.
EMU ESI: We had been looking for a modest decline in the European Commission’s ESI Economic Sentiment reading for the Eurozone to 106.6 (med 106.5) from 106.8, but after the weaker than expected Ifo earlier in the week and the weak Italian business confidence numbers yesterday the risk clearly is to the downside.
UK Domestic Product: the UK GDP numbers are out today and are expected to come in at 0.5% (previous 0.4%) QoQ and 1.9% (previous 2.1%) YoY.
US Initial Jobless Claims: are expected to be 280k in the week-ended January 23. Continuing claims are expected to fall to 2,195k for the week-ended January 16.
Nikkei gained 1.09% after a strong close on Wall Street and with the earnings season starting to overshadow lingering trade jitters at least for now. A weaker...
U.S. trade tariffs tightened market conditions. Coeure said that “while the effects of any tariffs on output and inflation may take time to materialise, falls...
China and Hong Kong alongside other markets were closed for Lunar New Year holidays, which muted trading, but the Nikkei gained 1.19%...
The U.S. currency has been correlating inversely with global stock market direction of late on the causation that risk-on phases have seen investors...
U.S. personal income rose 0.3% in November with spending up 0.6%. The 0.4% increase in October income was not revised. The 0.3% spending increase..
The FOMC meeting is front and center this week following the solid November jobs report on Friday, which provided the final bit of cover for...
Asian stock markets headed south again, as declines and energy and mining stocks led shares lower amid a further drop in metal prices. Concern China’s regulators may limit the flow...
The rout on Chinese bond and stock markets that dominated Thursday’s session faded and the Nikkei managed a 0.12% gain as the yen...
After a couple of panicky moments in global equities over the past week, the markets will keep a wary eye on political developments. In Washington...