FOMC, RBNZ Unchanged, BoJ surprises – JPY tumbles

Yesterday, The FOMC kept rates unchanged at 0.5% as we expected, but markets reacted very turbulent with first sending the US Dollar higher as the reference to global risks were removed, but ended the day trading lower as the market realised that no rate hikes were mentioned in the statement. Interest rates in the US took a leap lower and in FX, EURUSD recorded its third day of gains while US stocks were flat to higher.

Overnight in Asia, market action has been high as the Bank of Japan surprised the majority of the market by not adding further stimulus to the Japanese economy and delayed the forecast for reaching the monetary policy target of an inflation of 2% for the fourth time in less than two years. The interest rate was kept at -0.1% as expected and the easing stood firm at JPY80trn. Market reaction was to send risky assets on the offer, erasing the gains from the last seven days down 4.7% while the JPY is up 2.8% against the USD overnight and 2.5% against the EUR in time of writing.

NKY225 Daily – back below Ichimoku cloud

20160428 - JPN225Daily

In addition, on the monetary front the RBNZ in New Zealand kept rates unchanged at 2.25% triggering bids in the NZD, which is the best performer in the FX markets overnight.

NZDUSD daily – breaking above 50% Fibo in larger wave, targeting channel highs

20160428 NZDUSD.Daily

Oil kept above the $45/barrel despite a large build in Cushing Oil inventories.

Today, we have another busy day ahead of us. At 11CET, we have a string of sentiment indicators from the Euro Zone, expected to show a slight improvement and at 14CET, the preliminary German CPI figures for April will be released, which are expected to come off and show deflationary pressure on a monthly basis of -0.2%. This could send the EUR on the offer and EU stocks higher on back of speculation that the ECB will have to ease further in order to reach price stability of 2% in the Euro zone. Against the GBP, the EUR has since early April been on the offer and is now hovering between the 50- and 100-day SMAs, which act as support and resistance.

EURGBP Daily

20160428 EURGBP.Daily

 

From the US, the preliminary Q1 GDP will be the main event of the day. Both the main figure as well as the Price Index is expected to slow down, mainly due to a drop in consumption growth on back of weak consumer spending. However, we could see positive surprises from the investments in the housing market as well as an increase in the government spending. EURUSD is up for the fourth day in a row with next resistance at the 1.14-figure, while USDCAD has printed new 2016 lows this morning.

EURUSD Daily

20160428 - EURUSD.Daily

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