21 March; Unexpectedly dovish Fed send US$, yields sharply lower. BOE, SNB meetings ahead. Australian jobs coming up.

By | March 21, 2019

 

The US$ is sharply lower following Wednesday’s FOMC Meeting at which the Fed left rate on hold and exceeded the dovish expectations expected by the market. 11 of the 17 Fed board members indicated that the Fed might not need to raise the rate at all this year, while the dot plots point at the need to raise borrowing costs only once more through to 2021. The Fed also said that it will slow the pace at which it is shrinking its balance sheet, beginning in May, and will end the runoff of its Treasury holdings at the end of September, while also cutting its 2019 GDP forecast to 2.1%, from 2.3% and 2020 growth to 1.9% from 2.0%. This has all combined to send the dollar sharply lower, to break all sorts of technical support level, with the DXY diving to a low, so far, of 95.74, but currently back at 96.00.

In other markets, US yields are markedly lower with the US10Y currently at 2.53%, while stocks have been volatile but have ended the session not too far from where they started. Commodities were the big winner from the weaker dollar, with the metals and oil both making good gains, with WTI finally breaking above 60.00pb, to 60.25, but settling back at 60.00

While the dollar is weaker, and technically still looks heavy right now, the bad news for the US$ is now in the market. However, the Fed committee said it viewed “sustained” growth as the most likely outcome and that the US economy is in a good place, so the US may well outperform the economies of the EU, China and others, including Australia, and in the longer term I think any downside for the dollar may be rather limited..

Thursday will be largely spent in disseminating the details of the FOMC Meeting but there are plenty of other items on the agenda as well, in what will be a busy day. We kick off with the NZ Q4 GDP (exp 0.6%qq, 2.5%yy), the Australian Unemployment figures for February (exp Headline rate; 5.0%, +15K, PR; 65.7%) and the quarterly RBA Bulletin. This comes ahead of a busy European session, when the SNB and BOE will both hold their meetings. No changes are expected from either, and a very cautious tone is expected from both, with the BOE in particular likely to sit on the fence given the never ending Brexit debacle. Ahead of the BOE announcement, the UK Retail Sales figures for February will be released (exp -0.4%mm, +3.3%yy). The US will not have much to go on, with just the Philadelphia Fed Mfg Survey (exp 4.5) and the weekly Jobless Claims (exp 225K) on the calendar.

Economic data highlights will include:

Thur: NZ Q4 Current Account, Credit Card Spending, Australian Unemployment, RBA Bulletin, EU Council Meeting, EU Economic Bulletin, SNB Interest Rate Decision, UK Retail Sales, BOE Meeting/Statement/Minutes/Vote Count/APP Facility, US Philadelphia Fed Mfg Survey, Jobless Claims

Market moves, in brief:

FX: DXY 96.00 (-0.42%)

Bonds: US10Y; 2.53% (-1.77%), German 10Y; 0.084%(-17.8%), UK 10Y; 1.146% (-3.68%), Australian 10Y; 1.948% (+0.15%), NZ 10Y; 2.06% (+0.24 %), China 10Y; 3.156% (-0.25%)

Stock Indices: DJI; -0.55%, S+P; -0.29%, NASDAQ; -0.93%, EUStoxx50; -0.74%, FTSE100; -0.45%, Shanghai Composite; -0.01%,

Metals: Gold 1312 oz (+0.45%), Silver 15.48 oz (+0.69%), Copper 2.93 lb (+0.27%), Iron Ore 85.41 pt(-0.95%),

Oil: WTI 59.98 pb (1.56%)

CURRENCIES
EURUSD: 1.1411
Res  1.1425  1.1450  1.1485
Sup  1.1400  1.1335  1.1365
USDJPY: 110.70
Res  110.85  111.00  111.25
Sup  110.55  110.35  110.15
GBPUSD: 1.3197
Res  1.3250  1.3310  1.3360
Sup  1.3145  1.3100  1.3050
USDCHF: 0.9927
Res  0.9940  0.9970  1.0005
Sup  0.9895  0.9865  0.9840
AUDUSD: 0.7113
Res  0.7130  0.7150  0.7165
Sup  0.7100  0.7075  0.7055
NZDUSD: 0.6879
Res  0.6895  0.6915  0.6940
Sup  0.6860  0.6845  0.6825
INDICES / COMMODITIES
S&P.fs: 2823.03
Res  2835.00  2845.00  2855.00
Sup  2820.00  2810.00  2800.00
DJ30.fs: 25695.00
Res  25820.00  25960.00  26145.00
Sup  25645.00  25515.00  25375.00
SPI200.fs: 6148
Res  6170  6185  6200
Sup  6125  6140  6110
XAUUSD: 1314.38
Res  1320.00  1325.00  1330.00
Sup  1310.00  1305.00  1300.00
XAGUSD: 15.48
Res  15.55  15.65  15.75
Sup  15.40  15.30  15.20
WTI.fs: 60.11
Res  60.55  61.40  62.25
Sup  59.50  58.70  58.00