Global Markets:

  • Japan (JPY) All Industry Activity Index (APR) (m/m): -4.3%, Expected: -3.7%, Previous: 1.5%
  • Japan (JPY) Leading Economic Index (APR): 106.5, Previous: 107.1
  • Australia (AUD) RBA Foreign Exchange Transaction (MAY): 489, Previous: 325M
  • New Zealand (NZD) Gross Domestic Product (Q1) (q/q): 1.0%, Expected: 1.2%, Previous: 0.9%
  • BOJ Governor Kuroda says inflation moving smoothly towards target in comments to parliament
  • BoJ’s Morimoto says country will likely reach its 2% inflation target in fiscal year 2015
  • Asia stock markets: Nikkei and ASX are both up 1.50 %, Hang Seng gained 0.35 %, Shanghai Composite is down 0.50 %
  • Commodities: Gold at $1278, Silver at $19.88, Crude Oil at $106.12
  • Bonds: US 10 year yield at 2.58

 

FOMC Highlights:

  • Monthly bond purchases cut by $10B to $35B
  • Forecast changes – lower unemployment rate, higher inflation and significantly weaker growth
  • 2014 Unemployment forecast cut to 6%-6.1% vs. 6.1%-6.3% in March
  • 2014 Inflation forecast raised to 1.5%-1.7% vs. 1.5%-1.6% in March
  • 2014 GDP growth cut to 2.1%-2.3% from 2.8%-3% in March
  • Fed sees slightly higher Fed Funds rate in 2015 (1.2% vs. 1.125% in March)
  • Majority expect first rate hike in 2015
  • Nearly all of the changes in the FOMC statement was in the first paragraph description of economy
  • No Dissents – All new members vote in line with majority
  • Policy remains accommodative, Fed repeats low rates likely
  • Fed notes rebound in economic activity and improvement in labor market
  • Unemployment rate though lower, remains elevated
  • Household spending appears to be rising more quickly, business investment resumed its advance

 

FX Update:

There was good buying in EUR/USD ahead of the Yellen press conference and plenty of short-term specs giving up on their short positions. However, 1.36 proved as tough resistance and the pair has spent the Asian session consolidating in a 12 pips range. There is still solid selling interest above 1.36 and towards 1.3650, including macro funds.

In USD/CAD, prime brokers were sellers overnight, but hit into bids from corporate accounts. Good buying interest ahead of the 1.08 barrier option + sizeable stops below and through 1.0790.New Zealand headline GDP came in a bit weaker than expected, but taking revisions to previous quarters into account today’s result still suggests that the economy had developed considerable momentum at the start of the year. Economic growth is now estimated to have been 1% or above for three quarters in a row. Hence, today’s data will not alter the RBNZ’s intention to continue hiking interest rates at its July meeting. First support at 0.87 and then 0.8660, while resistance at 0.8780.

 

Upcoming Events:

  • 08:30 GMT – UK Retail Sales (-0.5 % MoM, 4.3 % YoY)
  • 12:30 GMT – US Initial Jobless Claims (315k)
  • 14:00 GMT – US Philadelphia Manufacturing Index (14.0)