NEWS / Foreign Exchange

USD bearish FOMC Statement

By removing the possibility of a tightening, the Fed might serve as a trigger for another leg lower in the USD.

Overnight News Bullets

• US Mortage Applications March 16,out at 2.8% vs -2.7% exp.
• FOMC leaves rates unchanged at 5.25% as expected. Accompanying statement more or less removing possibility of a hike.
• JN BSI Larege Maanufacturing Q1, out at 0.1 vs a prior reading of 7.1.
• JN BSI Large All Industry Q1, out at 6.2 vs 6.5 exp.
• NZ Credit Card Spending Feb (YoY), out at 8.2% vs a prior reading 6.7%.
• AU New Motor Vehicle Sales Feb (YoY), out at 7.9% vs a prior reading of 5.8%.
• CA Retail Sales Jan,out at -0.2% inline with exp. Less Autos out at 0.3% vs 0.2% exp.
• CA Leading Indicators Feb,out at 0.7% vs 0.4% exp.
• IT Consumer Confidence March, out at 112.6 vs 111.2 exp.
• IT Unemployment RateQ4, out at 6.5% vs 6.7% exp.
• US API Crude Oil Inventories March, out at 5665K vs a prior reading of 6258K.
• JN Merchnds Trade Balance Feb,out at 979.6B vs 700.0B  exp.
• JN Adjusted Merchnds Trade Balance Feb, out at 655.1B vs 425.6B
• JN Supermarket Sales Feb (YoY), out at -1.6% vs a prior reading -2.4%.

Markets

• FX: USD remains offered through the Asian session, post FOMC statement.
• Fixed Income: US10Y??™s and Bunds Ranging. JGB??™s pushing higher on Fukui comments.
• Stocks: Very strong US session spilling over to Nikkei (+1.5%) and probably also Europe today.
• Commodities: Precious metals still edging higher. Crude slightly higher.

O/N Data Heat map:

Calendar

Today's Highlights:

This and Next Week??™s Highlights:

What's going on?

• The upshot of the Fed's statement looks to be on very similar lines to Bernanke's Feb. 28 testimony - it's watching the housing market carefully, it notes there are issues to be aware of, but with those issues not yet impacting the wider economy, it also needs to be mindful of the upside inflation risks that continue to linger.
• The big changes between the FOMC's Jan 31st statement and today's message were:  the alteration in the last line of the statement on the potential for a further tightening of policy.  January's comment 'the extent and timing of of any additional firming'  has been altered in March to 'Future policy adjustments..'.  In other words the FOMC has very carefully altered to a more neutral outlook.
• We could see another secular bear market in USD on this.
• EURUSD to test 1.3666. AUDUSD to test 0.8214.
• Can stocks survive a falling USD? Stock traders apparently ignoring the negative stimulus from housing and purely focusing on the eased rate outlook. That might be a mistake.

FX

USD to resume downtrend?