Market Roundup
- Fed puts hike in interest rate in play, June increase on table but Yellen's words and shifting forecasts highlight central bank's concern.
- MoF flow data week-ended March 14 - Japanese buy net Y510.6 bln foreign stocks, Y551.1 bln bonds, Y15.6 bln bills; foreign investors buy net Y244.3 bln Japanese stocks, Y616.3 bln bonds, Y906.7 bln bills.
- Fitch affirms Australia AAA rating, stable outlook.
- New Zealand Q4 GDP +0.8% q/q, +3.5% y/y, +0.7% and +3.3% expected, Q3 revised +0.9% q/q vs +1%.
Economic Data Ahead
- (0300 EDT/0700 GMT) Switzerland Feb trade balance; previous bln surplus.
- (0600 EDT/1000 GMT) Eurozone Q4labor costs, wages; previous +1.3% and +1.4% y/y.
- (0830 EDT/1230 GMT) US Q4 current account balance, $103.2 bln deficit consensus; previous $100.3 bln deficit.
- (0830 EDT/1230 GMT) US weekly initial jobless claims, 292k consensus; previous 289k.
- (1000 EDT/1400 GMT) US Mar Philly Fed business sentiment index, 7.1 consensus; previous 5.2.
- (1000 EDT/1400 GMT) US Feb leading indicators index, +0.2% consensus; previous +0.2%.
Key Events Ahead
- N/A EU Summit in Brussels (till tomorrow).
- N/A Ireland E500 mln 6-mo t-bill, Sweden inflation-linked bond auctions.
- (0400 EDT/0800 GMT) Riksbank Gov Skingsley Riksdag testimony.
- (0430 EDT/0830 GMT) SNB policy announcement, 3-mo LIBOR target likely -0.75%, -0.25% now.
- (0500 EDT/0900 GMT) Norges Bank policy announcement, depo rate cut to 1% from 1.25% expected.
- (0500 EDT/0900 GMT) Buba Thiele speech in Frankfurt.
- (0550 EDT/0950 GMT) France E7.5-8.5 bln zero/zero/3% 2018/20/22 OAT auctions.
- (0630 EDT/1030 GMT) UK DMO bln 2% 2025 Gilt auction.
- (0650 EDT/1050 GMT) France E1-1.5 bln 0.25/1.3/0.25% 2018/19/24 index-linked OAT auctions.
- (0950 EDT/1350 GMT) BoE ChiefEcon Haldane speech in London.
- (1000 EDT/1400 GMT) Fed Gov Tarullo Senate testimony.
FX Recap
Markets reacted violently to the Fed. Though "patient" was dropped as expected, the market took everything else very dovishly. US 2yr swaps dropped almost 15bps to 79bps (now 82bps) and Fed fund futures pushed back the expected first hike right until December. But the moves in FX were much more aggressive with USD dumping across the board.
The USD tumbled in late NY after the FOMC meeting, but didn't reach its low until over half an hour after the conclusion of the press conference. The currency then recovered over the session against the majors, though Treasury yields remained subdued, trading just above 1.90%.
EUR/USD had spiked above 1.1000 in late NY but was unable to rise back above 1.09 in Sydney trade, falling to 1.0758. It rallied over 2 big figures in 10 minutes at one stage to a high in the mid-1.10s. Traders are looking at a bullish short-term trend reversal in EUR/USD that opens up 1.1016 and 1.1098 on the topside but fundamentally they like layering in to a EUR/USD short at spot and adding to the position between 1.1050 and 1.11, targeting an eventual move to parity.
USD/JPY was relatively subdued, trading 119.68 to 120.57 after a post-FOMC dip below 119.50. The Nikkei was down 0.4%, while other bourses in the region followed the S&P higher. USD/KRW found support around 1110. USD/SGD dipped below 1.3730 before recovering.
AUD/USD rose to as high as 0.7846, then pulled back to end the Australia session at its low of 0.7720/25 after failing at 0.7800 at midday. Australian interest rate futures followed the US, with around 50% of a cut in April priced in again. Both 3 and 10 year bond futures rallied decently.
NZD/USD traded 0.7547 in very early Sydney before pulling back. It then rose steadily after the release of GDP: q/q printed as expected at 0.8%; and y/y growth was a little higher at 3.5%. The kiwi ended the session at its low around 0.7455. AUD/NZD traded as low as 1.0342.
