Global Markets:

  • Asian stock markets: Nikkei down 0.45 %, Shanghai Composite gained 0.30 %, Hang Seng rallied 1.30 %, ASX rose 1.80 %
  • Commodities: Gold at $1170 (+1.70 %), Silver at $15.97 (+2.75 %), WTI Oil at $45.94 (-1.50 %), Brent Oil at $55.45 (-2.00 %)
  • Rates: US 10 year yield at 1.927, UK 10 year yield at 1.603, German 10 year yield at 0.20

News & Data:

  • Japan Tankan Index 16.0, Previous: 11.0
  • Japan Industry Activity Index 1.9 %, Expected: 1.7 %, Previous: -0.1 %
  • New Zealand GDP 0.8 % q/q, Expected: 0.7 %, Previous: 1.0 %
  • New Zealand GDP 3.5 % y/y, Expected: 3.3 %, Previous: 3.2 %
  • Morgan Stanley: Fed Won’t Raise Rates In 2015 On Soft Inflation And Strong USD
  • Greek Bank Deposits Outflow Spikes — Ekathimerini
  • Greek Deputy PM: Greece Has A Liquidity Problem, Need Co-operation With EU
  • Japan EconMin Amari: Can See Japan Real Wages Rising From Around Summer

FOMC Meeting Highlights:

  • Fed drops “patient” pledge, opens door to rate hike in June or later
  • Fed officials see lower range for longer-run unemployment rate
  • FOMC: Increase in rates remains unlikely at April FOMC meeting
  • FOMC: Economic growth has moderated somewhat
  • FOMC: Change in forward guidance does not mean Fed has decided on timing of rate hike
  • FOMC: Export growth has weakened
  • FOMC: Inflation has declined further, largely reflecting energy prices decline
  • FOMC: Labour market conditions have improved further, job gains strong
  • FOMC: Fed expects inflation to rise gradually toward 2 % over medium-term
  • FED projects inflation at 0.6-0.8 % in 2015, 1.7-1.9 % in 2016; 1.9-2.0 % in 2017
  • FED sees Fed Funds Rate at median of 1.875 % at end of 2016
  • FED projects GDP 2.3-2.7 % in 2015; 2.3-2.7 % in 2016; 2.0-2.4 % in 2017
  • FED projects unemployment rate 5.0-5.2 % in 2015; 4.9-5.1 % 2016; 4.8-5.1 % 2017
  • Fed Chair Yellen: Timing of initial increase in target range will depend on data
  • Fed Chair Yellen: Don't want to rule out raising rates at subsequent meetings
  • Fed Chair Yellen: Pace of jobs growth has remained strong
  • Fed Chair Yellen: FOMC members see rates running lower than normal in future because of constrained credit
  • Fed Chair Yellen: Dollar one factor holding down import prices

Markets Update:

The US Dollar weakened sharply after the FOMC as the statement was more dovish than market participants anticipated. The Fed dots projections were lowered quite substantially, with the median forecast now projecting two rate hikes this year (0.625 %) vs four previously. The 2016 and 2017 dots for interest rates were also lowered by 0.625 % and 0.50 % respectively. While the FOMC members sounded quite upbeat on the US jobs market, they see inflation running lower for an extended period of time amid a strong US Dollar pushing down import prices and declining energy prices.

Given the crowded positioning in the FX market, it was not surprising to see USD longs running for the exit post-FOMC, but liquidity was indeed unexpectedly poor. EUR/USD rallied to 1.1050, only to drop 200 pips a few minutes later. Similar price action in most of the other major pairs, with GBP/USD reaching a high of 1.5150 (up almost 550 pips from the day’s low) and USD/CAD falling to a low of 1.2450. USD/JPY was quite stable and remained well bid considering everything. 119.30 is the overnight low and the overall uptrend remains intact, as long as the pair is trading above 116.00.

Looking ahead, we have the Swiss National Bank rate decision at 0830 GMT, followed by the Norwegian CB rate decision half an hour later.

Upcoming Events:

  • 07:00 GMT – Swiss Trade Balance (CHF2.87bln)
  • 08:30 GMT – Swiss National Bank Rate Decision (-0.75 %)
  • 08:30 GMT – SNB Chairman Jordan speaks
  • 09:00 GMT – Norges Bank Rate Decision (1.00 %)
  • 12:30 GMT – US Initial Jobless Claims (297k)
  • 12:30 GMT – US Current Account (-$103.6bln)
  • 14:00 GMT – US Philadelphia Fed Manufacturing Index (7.4)