The FED held rates unchanged and left USD bulls deflated after the Fed statement and conference was nothing but dovish, pushing back any hopes of a rate hike with members only seeing one hike possible in 2016, a far cry from the bullish tone Yellen instilled in market just a few short weeks ago. The most rampant adopters of the dovish tone where the gold traders who were relentless in buying the precious metal, topping out above 1300 and trading at highs not seen since 2014, while stocks bucked expectation trading lower as the FEDs inaction was read as a major concern regarding the economic wellbeing of the US which will filter through to companies in dues time. As usual the USD, commodities and equities will be sensitive to any economic data which the Fed said they would be watching as they tried to convince markets that they could act at any of the upcoming meeting, should the data warrant it. As it stands, fundamentally, the US economy should continue to sell off in the medium term with the USD weakening further while gold retakes centre stage and equities wobble.
On the other side of the Pacific, the BOJ also held their meeting and surprised markets by not changing their stance on the current liquidity and easing tools being employed to stabilise the Japanese inflation rate even after they have been threatening to do just this for the last few weeks. Gov Kuroda instead held monetary policy unchanged with a caveat that they could make changes as and when needed. The markets took this in their stride and quickly jumped into purchasing JPY as the safe haven currency became more attractive now that fears of currency devaluation is off the table.
Today sees the Bank of England take centre stage as it too releases it rate decision and monetary policy summary. The meeting is of exceptional importance as it comes exactly one week before the BREXIT vote is due, in which the fate of the UK in the EU will be decided. Should the BOE strike a hawkish tone or mention the resilience it might have should the UK vote to leave the UK, we would see the GBP sore against its rivals and vice versa should they strike a dovish tone or show extreme concern regarding the vote.
Today’s upcoming data is as follows:
- Retail Sales m/m expected at 0.3%
- Monetary Policy Summary
- Official bank Rate expected at 0.5%
- Bank of England Carney Speaks
- CPI m/m expected at 0.3%
- Core CPI m/m 0.2%
- Philly Fed Manufacturing Index expected at 1.1
- Unemployment Claims expected at 267k