Yen skyrockets after BoJ stood pat

16 June, 2016

No easing, no Yen relief. This is the message markets are trying to send the BoJ after the central bank refrained from easing monetary policy. Deposit rate remained at -0.1% and the annual pace of its asset purchase program was held at ¥80 trillion. Although the decision was widely anticipated by markets, some believed that BoJ could probably surprise, if not through lowering deposit rates then through increasing its scale of purchasing ETF’s or JGB’s. USDJPY broke immediately below two key support levels of 105.52 (May Low) and psychological support of 105 to trade at lowest level since September 2014. With lot of pessimism in markets, 100 level could be next on traders’ radars.

Soft labor market and uncertainty over UK’s referendum on June 23 has kept the Federal Reserve on hold for the fourth meeting in a row. The most watched dot plot used by the Fed to provide projections on interest rates path continued to see it’s dots slipping down, and although the door was kept opened for a rate increase in next meeting, the cautious speech by Chair Janet Yellen pulled back markets expectation for July hike to 7% and less than 30% chance for September. All in all, the meeting was more dovish than what markets anticipated.  

Here’s the key takeaways from the Fed’s meeting:

  • The decision to keep rates on hold had no dissenting votes as compared to past meetings.
  • The Fed still sees two rate hikes in 2016.
  • However, 6 of the 17 members forecasted only one rate hike this year.
  • Rate hikes for 2017 and 2018 have been scaled back by 25 and 62.5 basis points respectively.
  • Economic growth forecast cut for 2016 and 2017.
  • Core PCE inflation forecast revised higher for 2016 and 2017 but will only reach 2% in 2018.
  • “Improvement in the labor market has slowed while growth in economic activity appears to have picked up.” This is completely the opposite when compared to April’s statement.
  • Brexit is a serious risk to the U.S. economy.

The dovish stance prompted bond rally and USD selloff, meanwhile it seems only a matter of days until yields on 10 year notes test a new record low. Two major factors could provide another leg to the bond rally, one is flight to safety in such an uncertain time, and the other is no attractive alternative with $10 trillion of worldwide bonds’ yields in negative territory. 


Source link  
Global shares extend recovery

Asian equity markets continued to build on last week’s gains, after U.S. stocks capped their best week since 2013. Investor sentiment has gradually...

All eyes on U.S. inflation figures

After wiping off more than $5 trillion in market cap past week and volatility hitting the roof, global equities are finally showing signs of stabilization...

Equities continue to be a mixed bag

The US equity markets were another rollercoaster for traders for the open of the week as the S&P continued to try and surge back after the recent movements from...


Equity bears take back hold

The equity bears are back in town and they most certainly have their claws out. Markets had briefly recovered and were looking upbeat for the most...

Market's wild ride not over yet

Investors across the globe are finding it difficult time currently to decide on whether to buy the recent dips, or to remain on the sidelines until the dust...

Equity markets shake of the bears

Markets have been hot and cold today as equities saw some intense volatility. For most, it was the beginning of the end at the start of the week...


Global equity markets drop sharply

Global markets were having a case of the Monday blues today as they tumbled sharply on the back of fears around global economic growth and a potential slowdown.

Markets adjusting to new reality

When markets are priced for perfection, a slight shift in sentiments causes much damage. This is what we saw last week after U.S. jobs report showed...

Markets set to focus on non-farm payroll

The market is currently taking a breather after the US data today as it's almost time for non-farm payroll. Markets previously have been surprised by the...

  


Share: