Global Markets:

  • Asian stock markets: Nikkei up 0.70 %, Shanghai Composite gained 0.85 %, Hang Seng dropped 0.50 %, ASX rose 0.50 %
  • Commodities: Gold at $1206 (-1.50 %), Silver at $16.89 (-2.00 %), Crude Oil at $81.89 (-0.40 %)
  • Rates: US 10 year yield at 2.310, UK 10 year yield at 2.260, German 10 year yield at 0.898

News & Data:

  • Fed tapers by $15 billion; ends QE programme
  • RBNZ leaves rates unchanged at 3.50 %
  • Australia HIA New Home Sales 0.0 %, Previous: 3.3 %
  • Australia Export Price Index QoQ -3.9 %, Expected: -4.8 %, Previous: -7.9 %
  • Australia Import Price Index QoQ -0.8 %, Expected: 0.3 %, Previous: -3.0 %
  • Japan PM Abe: Reaction to sales tax hike is close to worst projection
  • Bank of Canada Governor Poloz: Canada monetary stimulus remains appropriate, economy has “considerable excess capacity”
  • Poloz: Forward guidance is only useful when the benefits are clear
  • Poloz: Global economy in much better place vs. 3yrs ago, weaker CAD icing on the cake for exports, but concerned about oil price drop
  • Poloz: USD showing broad signs of strength, curbing investment with China may hurt competitiveness

Markets Overview:

Most traders were expecting the FOMC to be a non-event as there was no press conference or economic projections, but the statement surprised as slightly hawkish. The Fed ended it’s QE programme, as expected. Further, the FOMC upgraded their assessment of the job market, noting that “the underutilization of labor resources is gradually diminishing”. They kept the “considerable time” language in the statement, but noted that faster/slower progress on achieving it’s mandate would result in sooner/later increases in interest rates. The main points that are seen as slightly more hawkish are the more upbeat comments on the condition of the job market and low concern about economic weakness abroad and the recent market volatility.

Meanwhile, the RBNZ kept rates unchanged at 3.50 %, as expected. Their tone was quite dovish, but the market was expecting this, so there were no surprises in the bank’s statement. The bank noted that the current level of the NZD remains unjustified and unsustainable and that a further, significant depreciation can be expected. On the lower inflation print (1 %), the bank said that the main contributing factors were subdued wage inflation, weak global inflation, fall in oil prices and the high New Zealand Dollar. Overall, the RBNZ sees a period of assessment as appropraite before considering further policy adjustment.

In the FX market, we saw a broad USD rally after the FOMC minutes. Dollar bulls see their view reaffirmed that the Fed remains on track to hike rates in Q2 of 2015. Leveraged funds and CTAs were buyers of USD/JPY overnight and the pair has taken out the 109.00 level. A test of 110.00 is possible should US econ data surprise positively today. Meanwhile, EUR/USD has broken back below the 1.26 level. EUR-sentiment remains negative, but it will need a clear break sub-1.25 for downside momentum to accelerate again.

Looking ahead, we have German employment data at 08:55 GMT today, but the main event of the day will be US GDP data at 12:30 GMT.

Upcoming Events:

  • 08:00 GMT – Spanish GDP (0.5 % QoQ, 1.6 % YoY)
  • 08:00 GMT – Spanish CPI (0.0 % YoY)
  • 08:55 GMT – German Unemployment Rate (6.7 %)
  • 08:55 GMT – German Unemployment Change (5k)
  • 12:30 GMT – US GDP (3.0 %)
  • 12:30 GMT – US Initial Jobless Claims (282k)
  • 13:00 GMT – Fed Chair Yellen speaks
  • 13:00 GMT – German CPI (-0.1 % MoM, 0.9 % YoY)