Market Roundup
• Fed Keeps rate target steady at 25-50bps, Vote 7-3; dissenters George, Mester & Rosengren.
• Fed: Economic conditions will evolve in a way that warrants only gradual increases in FF rate.
• Fed: GDP forecast: '16 1.8% v 2% previous; '17 & '18 unchanged at 2%.
• Fed DOTS: '16 DOTs mean 0.6% v 0.9%; '17 1.1% v 1.6%, '18 1.9% v 2.4%; '19 2.6%.
• Fed’s Yellen: expects core inflation to rise to 2% on the back of strong labor gains over next 2-3 years.
• US mortgage demand to buy homes -7.3%, hits 6-mos low; Weekly refinancing activity -4% - MBA.
• BOJ reboots policy, offers little boost for economy, and commits to keep 10-yr JGB yield around zero pct.
• Yen strengthens on skepticism about BOJ's new framework, moves to NY low 100.57.
• Mexico’s Meade: Fed decision likely to have some impact on peso; MXN to new all-time low 19.9140.
Looking Ahead - Economic Data (GMT)
• No Significant Data
• Japan Holiday (Autumnal Equinox Day)
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1120 levels and currently trading at 1.1191 levels. The pair has made session high at 1.1197 and hit lows at 1.1135 levels. Euro inched higher against US dollar on Wednesday as the greenback stumbled after the U.S. Federal Reserve left interest rates unchanged but strongly signaled it could still tighten monetary policy by the end of this year as the labor market improves further. Fed policymakers, however, cut the number of rate increases they expect this year to one from two, and also projected a less aggressive rise in rates next year and in 2018, according to the median projection of forecasts released with the statement. The dollar index, which measures the greenback against a basket of six major currencies, extended its decline to a five-day low of 95.515, off more than 0.50 percent and down from a more than six-week high of 96.333 touched earlier. The euro rose against the dollar to a session high of $1.1196 after the Fed statement, recovering from earlier losses.
GBP/USD is supported in the range of 1.2945 and currently trading at 1.3034 levels. It reached session high at 1.3047 and hit low at 1.2953 levels. Sterling inched higher on Wednesday after the U.S. Federal Reserve held interest rates unchanged but sent a strong signal for monetary policy tightening before the end of 2016. The Fed also projected a less aggressive rise in rates both next year and in 2018, according to the median projection of forecasts released with the statement. Since plumbing a three-decade low of $1.2798 in early July, shortly after Britain's referendum on EU membership, the pound had rallied more than 5 percent up against the dollar, as economic data showed the immediate effects of the Brexit vote were not as dire as had been feared. Sterling slipped towards $1.2950 in early US session but recovered when the U.S. Federal Reserve announces its latest policy decision.
USD/CAD is supported at 1.3026 levels and is trading at 1.3099 levels. It has made session high at 1.3236 and lows at 1.3098 levels. The Canadian rose against U.S. dollar on Wednesday as oil rose and the U.S. Federal Reserve left monetary policy unchanged and projected a less aggressive rise of interest rates in coming years. U.S. crude prices were up 2.07 percent at $44.96 a barrel after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output. The Canadian dollar was last trading at C$1.3100 to the greenback, stronger than Tuesday's close of C$1.3209. On the data front, Canadian wholesale trade rose in July for the fourth consecutive month, posting a 0.3 percent gain on strength in the motor vehicle and parts subsector. Canadian inflation and retail sales data are due on Friday. The annual inflation rate is forecast to have edged up to 1.4 percent in August.
AUD/USD is supported around 0.7534 levels and currently trading at 0.7627 levels. It hit session high at 0.7630 and made session lows at 0.7556 levels. The Australian dollar edged higher against US dollar on Wednesday as its U.S counterpart slipped after the U.S. Federal Reserve left interest rates unchanged but signaled it could tighten monetary policy by year-end. The Fed repeated that the case for a rate increase had strengthened, but cut the number of rate increases it expected this year to one from two previously and forecast a less aggressive tightening over the next two years. The Australian dollar rose towards 0.7630. That was the highest since Sept. 9th and its third straight day of gains. Earlier in the Asian session, the Bank of Japan overhauled its monetary policy to target interest rates. The BOJ maintained its 0.1 percent negative interest rate, but abandoned its base money target. Instead, it set a yield curve control under which it will buy long-term government bonds to keep 10-year bond yields around their current zero percent.
Equities Recap
European shares hit a one-week high on Wednesday before the outcome of a Fed meeting, with banks rallying after a policy overhaul at the Bank of Japan lifted risky assets globally.
UK's benchmark FTSE 100 closed up by 0.2 percent, the pan-European FTSEurofirst 300 ended the day up by 0.46 percent, Germany's Dax ended up by 0.5 percent, France’s CAC finished the day up by 0.6 percent.
Wall Street racked up gains on Wednesday after the U.S. Federal Reserve kept interest rates unchanged, for now leaving intact the low-rate environment that has helped underpin the bull market.
Dow Jones closed up by 0.91 percent, S&P 500 ended up by 1.08 percent, Nasdaq finished the day up by 1.01 percent.
Treasuries Recap
U.S. Treasury yields fell on Wednesday after the Federal Reserve downgraded its economic growth forecast and lowered its projection for interest rate levels needed to support expansion.
In late trading, benchmark 10-year Treasury notes rose 9/32 in price for a yield of 1.655 percent, down 3 basis points from Tuesday.
The yield gap between five-year and 30-year Treasuries shrank to 119 basis points, which was its flattest in over a week.
Commodities Recap
Gold prices rose to 1-1/2-week highs on Wednesday, extending gains after the U.S. Federal Reserve held interest rates unchanged but sent a strong signal for monetary policy tightening before the end of 2016.
Spot gold was up 1.2 percent at $1,330.08 an ounce by 2:58 p.m. EDT (1858 GMT), after rising to $1,335.01 an ounce, the highest since Sept. 9.
U.S. gold futures settled up 1 percent at $1,331.40 prior to the release of the Fed statement.
Oil prices rose up as much as 3 percent on Wednesday after a third surprise weekly drop in U.S. crude stockpiles helped assuage fears over a global oil glut.
Brent crude futures settled up 95 cents, or 2 percent, at $46.83 per barrel.
U.S. West Texas Intermediate (WTI) crude futures rose $1.29, or 2.9 percent, to settle at $45.34.
