Global Markets:
- Asian stock markets: Nikkei up 0.10 %, Shanghai Composite fell 0.75 %, Hang Seng declined 2.00 %, ASX 200 lost 0.80 %
- Commodities: Gold at $1141 (-1.90 %), Silver at $16.78 (-2.60 %), WTI Oil at $51.000 (-0.05 %), Brent Oil at $54.00 (+0.20 %)
- Rates: US 10 year yield at 2.58, UK 10 year yield at 1.38, German 10 year yield at 0.363
News & Data:
- Japan Nikkei Manufacturing PMI Dec P: 51.9 (prev 51.3)
- Australian Unemployment Rate Nov: 5.7% (est 5.6%, prev 5.6%)
- Australian Participation Rate Nov: 64.6% (est 64.5%, prev 64.4%)
- Australian Full Time Employment Change Nov: 39.3K (rev 42.2K)
- Australian Part Time Employment Change Nov: -0.2K (rev -31.3K)
- Australian Consumer Inflation Expectations (YoY) Dec: 3.4% (prev 3.2%)
- NZ Business NZ Manufacturing PMI Nov: 54.4 (prev 55.2, 55.1)
- NZ Value of All Buildings (QoQ) Q3: 1.4% (est 2.1%, prev 5.5%)
- Singapore Retail Sales (YoY) Oct: 2.2% (est 0.3%, prev 2.0%)
- Bank of Korea keeps base rate unchanged at 1.25%, as expected
- PBoC fixes yuan at 6.9289 (prev 6.9028)
Federal Reserve Statement:
- Fed hikes to range of 0.50%-0.75%
- Repeats gradual policy path plan
- Policy supporting 'some further strengthening' on goals
- Votes were unanimous
- Stance of monetary policy remains accommodative
- Inflation has increased since earlier this year
- Economy has been expanding at a moderate pace
- Market-based measures of inflation have moved up 'considerably' but are still low
- most survey-based measures of longer-term inflation expectations are little changed
- Expects conditions to evolve in way that warrants 'only gradual increases' in rates
- Officials see three 2017 hikes versus two in Sept dots
- Sees slightly higher pace of growth and lower unemployment
- Repeats household spending has been 'rising modestly'
- Repeats that near-term risks to the economic outlook appear roughly balanced
Markets Update:
The Federal Reserve hiked rates by 25 bps, as expected by the market. However, the statement was more hawkish than anticipated, which led to an extension of the Dollar rally. The dot plot of the FOMC now projects three rate hikes in 2017 vs. two previously. The Fed also acknowledged the rise in inflation and higher pace of growth.
The Dollar soared against all major currencies post-FOMC. USD/JPY rallied to a high of 117.85, up more than 300 pips, while EUR/USD tumbled from 1.0660 to a low of 1.0470 so far. EUR/USD is likely to test the 2015 low of 1.0450 soon, while USD/JPY has now no significant resistance until 120.
Commodity currencies have also come under pressure, although less than the other majors. AUD/USD only fell to 0.7383 (from 0.75 pre-FOMC), and ND/USD declined to 0.7075.
Upcoming Events:
- 08:00 GMT – France Manufacturing PMI
- 08:00 GMT – France Services PMI
- 08:30 GMT – Germany Manufacturing PMI
- 08:30 GMT – Germany Services PMI
- 09:00 GMT – Euro Zone Manufacturing PMI
- 09:00 GMT – Euro Zone Services PMI
- 09:30 GMT – UK Retail Sales
- 13:30 GMT – US CPI
- 13:30 GMT – US Initial Jobless Claims
- 14:45 GMT – US Manufacturing PMI
- 15:00 GMT – US NAHB Housing Market Index
