Market Roundup
• Fed leaves target rate unchanged at 0.25-0.50%; sees 2 hikes in ’2016, 3 in ’2017.
• Fed sees economy growing at 2% no longer above LT trend, says improvement in labor market slowed since April despite pickup in economic activity.
• Fed’s Yellen: has seen hints wage growth picking up, inflation behaving roughly as she expected.
• Fed’s Yellen: no timetable for next hike, not impossible that by July Fed will see data strong enough for hike.
• US Industrial Production -0.4% in May, Manufacturing output drops 0.4% on auto’s/parts biggest drop in 2.5 years.
• US Producer prices rise 0.4% in May, core 0.3%vs 0.1% forecast.
• ECB’s Constancio: No broad sign of instability or excesses in asset prices has been detected in Euro area countries,use of negative rates has limits.
• ECB’s Weidmann: longer ultra-loose policy is maintained larger are risks of collateral damage.
Looking Ahead - Economic Data (GMT)
• 22:45 New Zealand GDP Production QQ* Q1 forecast 0.5%, 0.90% -previous
• 22:45 New Zealand GDP - Annual-Avg, Prod-Bas Q1 forecast 2.4%, 2.50% - previous
• 22:45 New Zealand GDP - Annual* Q1 forecast 2.6%, 2.30% - previous
• 22:45 New Zealand GDP Expenditure QQ* Q1 forecast 0.6%, 1.10% - previous
• 23:50 Japan Foreign Bond Investment w/e 893.9b- previous
• 23:50 Japan Foreign Invest JP Stock w/e -97.8b- previous
• 01:30 Australia New Motor Vehicle Sales m/m* May 2.20%- previous
• 01:30 Australia Employment* May forecast 15.0k, 10.8k – previous
• 01:30 Australia Full Time Employment* May -9.3k- previous
• 01:30 Australia Participation Rate* May forecast 64.9%, 64.80%- previous
• 01:30 Australia Unemployment Rate* May forecast 5.7%, 5.70% - previous
Looking Ahead - Events, Other Releases (GMT)
00:00 Japan- BOJ Rate Decision forecast -0.1%; no change expected
Currency Summaries
EUR/USD is likely to find support at 1.1135 levels and currently trading at 1.1260 levels. The pair has made session high at 1.1298 and hit lows at 1.1208 levels. The U.S. dollar declined against euro on Wednesday after the Federal Reserve held interest rates steady, as expected, and lowered its economic growth forecasts for this year and next, suggesting it would be less aggressive in tightening policy after 2016. Yellen gave no clues as to whether a rate hike could come as early as the Fed's next rate-setting meeting in July, or whether the central bank would wait for a slew of firmer data as it headed into its September meeting. Markets have all but priced out any rate rise in 2016.Meanwhile; The rebound in risk appetite helped European stocks snap a five-day losing streak and gave China's stock market its biggest gains in two weeks despite MSCI deciding not to add mainland shares to one of its benchmark indexes. The euro was up 0.5 percent against at $1.1265 and rising 0.4 percent versus the yen to 119.39 yen.
GBP/USD is supported in the range of 1.4086 levels and currently trading at 1.4210 levels. It reached session high at 1.4210 and hit low at 1.4142 levels. Sterling inched higher against dollar for the first time in more than a week on Wednesday, rising by as much as half a percent after a poll gave the "Remain" camp a marginal lead ahead of next week's referendum on EU membership. ComRes poll for Britain’s sun newspaper, came out in favour of Brexit on Tuesday, gave the "Remain" camp a 1 point lead going into the final week of campaigning. Betting odds showed a 62 percent chance of a vote to stay in the European Union, up from 55 percent on Tuesday. Meanwhile, the UK economy still looks in better shape than many of its European counterparts. Wednesday's data showed unemployment falling to 5.0 percent in April and wages up by 2 percent in annual terms or more, depending on the measure.
USD/CAD is supported at 1.2810 levels and is trading at 1.2919 levels. It has made session high at 1.2944 and lows at 1.2864 levels. The Canadian dollar declined to hit fresh one-week low against its U.S. counterpart on Wednesday as oil fell, but gained slight ground after the Federal Reserve kept U.S. overnight interest rates unchanged and lowered its economic growth expectations. Oil prices declined for the fifth straight session in what would be their longest losing streak since February, weighted down by increased concerns about Britain's possible exit from the European Union and a surprise rise in U.S. inventories. U.S. crude prices were down 1.55 percent at $47.74 a barrel. On the data front Canadian manufacturing sales grew by a greater-than-expected 1.0 percent in April from March after two consecutive month-on-month declines, data from Statistics Canada indicated on Wednesday.
USD/JPY is supported around 105.00 levels and currently trading at 105.96 levels. It peaked to hit session high at 106.15 and made session lows at 105.40 levels. Japanese yen surged higher against US dollar on Wednesday as concerns over Britain's referendum on its EU membership eased, while the dollar weakened across the board after Federal Reserve kept U.S. interest rates unchanged on Wednesday and lowered its economic growth forecast for 2016 to 2.0 percent growth from 2.2 percent and its outlook for 2017 to 2.0 percent from 2.1 percent. The BOJ, meanwhile, will announce its policy decision on Thursday, with a recent spike in the yen adding to headaches for policymakers. While most in the market expect an easing in July, some traders said the sharp yen gains could force the central bank's hand this week. In afternoon trading, the dollar fell to 105.50 yen the lowest since mid-October 2014. It has since recovered to 105.97, down 0.1 percent
Equities Recap
European shares rose on Wednesday after a five-day losing streak caused by jitters over next week's British referendum on European Union membership, with a reassuring earnings update and bid talk boosting Zodiac Aerospace.
UK's benchmark FTSE 100 closed up 0.97 percent, the pan-European FTSEurofirst 300 ended the day up 1.12 percent, Germany's Dax ended up 1.9 percent, France’s CAC finished the day up 1.16 percent.
Wall Street fell for a fifth straight session on Wednesday after the Federal Reserve left U.S. interest rates unchanged and investors remained nervous about an impending vote in Britain on whether to leave the European Union.
Dow Jones closed down by 0.17 percent, S&P 500 ended down by 0.16 percent, Nasdaq finished the day down by 0.15 percent.
Treasuries Recap
U.S. Treasury yields fell on Wednesday after the Federal Open Market Committee kept U.S. overnight interest rates unchanged and lowered its economic growth expectations, prompting investors to write down the chances for more rate hikes this year.
Benchmark 10-year U.S. Treasury notes rose 6/32 in price to yield 1.590 percent.
Commodities Recap
Oil prices fell for a fifth straight day on Wednesday, their longest losing stretch since February, on worries Britain might leave the European Union while the U.S. Federal Reserve signaled plans for two U.S. rate hikes this year despite slower growth expectations.
Brent crude futures' front-month settled down 86 cents, or 1.7 percent, at $48.97 a barrel. In post-settlement trade, it fell as low as $48.56 by 3:46 p.m. EDT (1946 GMT).
The front-month in U.S. crude's West Texas Intermediate (WTI) futures settled down 48 cents, or 1 percent, at $48.01 per barrel. The session low was $47.55. In post-settlement it fell to $47.45.
Gold hit a six-week high on Wednesday, climbing for the sixth straight session after the Federal Reserve lowered its economic growth forecasts through 2017, indicating it will be less aggressive in tightening monetary policy next year.
Spot gold was up 0.7 percent at $1,293.86 an ounce at 2:48 p.m. EDT (1848 GMT), after rising to $1,296.70, the highest since May 3.
U.S. gold futures for August delivery settled up 20 cents an ounce at $1,288.30 prior to the Fed statement.
