Key overnight events:
- The Fed kept rates unchanged at 0.25-0.50%, as expected, and signalled it still plans two rate increases for the rest of the year but lowered its economic growth forecasts. The FOMC said pace of improvement in the labor market has slowed while growth in economic activity has picked up.
- The number of Fed officials, who see just one rate increase this year rose to 6 from 1 in Match, according to the committee’s quarterly dot plots. The median long-run projection for fed-funds rate fell to 3.00% from 3.25%. According to Bloomberg, Fed funds futures pricing today indicate a 6% chance of a hike in July and a 24% probability of one in September.
- Fed chair Janet Yellen said UK’s June 23 referendum on Brexit could have consequences for the economic outlook of the US, and was a factor in the FOMC’s decision to hold rates last night.
- Industrial production in May contracted 0.4% from a month earlier, more than the 0.2% decrease which was expected. US producer prices rose 0.4% over the same period, faster than April’s 0.1% rise; the median estimate was a 0.1% increase.
- The S&P 500 Index slipped 0.2% after climbing as high as 0.5% during the session. Health-care and technology stocks were the biggest drags on the index while consume discretionary and material companies helped mitigate some losses.
- The Bloomberg Spot Dollar Index slipped 0.3% as the US dollar weakened sharply after Yellen’s speech but pared back almost all of its losses by its close. The pound gained the most in a week, climbing 0.6% to $1.4204 after data showed an unexpected acceleration in UK wage growth and unemployment falling to 5%.
- Crude oil futures expiring in July, slid 1.0% to close at $48.01/bbl; losses were extended earlier today as futures reached a session low of $47.35/bbl. The return of Canadian oil output following wildfires in a key energy-producing region outweighed a decline in US stockpiles.
- The BOJ refrained from expanding monetary stimulus earlier today as the committee voted 8-1 to maintain its asset-purchase program and 7-2 to keep its negative rate policy. The yen strengthened 1.7% against the US dollar to 104.53 – its strongest level since Sep 2014.
- Spot 1.3499
- Retail sales in April was worse than expected, registering a rise of 3.8% from a year earlier and 1.1% from a month earlier; the median estimate was 6.1% for the former and 2.2% for the latter.
- USDSGD slid 0.5% to an intraday low of 1.3483 earlier today.
- Spot 0.7393
- Employment rose 17,900 in May, more than the 15,000 estimated, although April’s increase was revised down from 10,800 to 800. Jobless rate was steady and matched expectations of 5.7%. There was no change to full time employment although its decrease the previous month was revised sharply lower. Participation rate was 64.8%, close to the 64.9% predicted.
- AUDUSD rose to test its 50-day moving average of 0.7446 before paring gains and retreating back to the 0.7400 handle following the release of the jobs report.
- Spot 1.2937
- USDCAD rose 0.7% to 1.2943 earlier today, and looks set to extend its winning streak to six straight days.
- Governor Poloz has appealed for patience in the face of choppy growth, arguing the economy will rebound over the next couple of years on the back of a US recovery.
- Recent trade data has shown a sharp drop in non-energy exports. Since reaching a record in January, total exports are down 9.3%, including a 0.1% drop in non-energy shipments.
- Spot 6.5927
- The yuan reference rate rose to a one-week high of 6.5739 today, after the dollar declined on dovish signals from last night’s FOMC meeting.
- USDCNH retreated below the 6.6000 handle, falling 0.2% to its day-low of 6.5854.
- China’s holdings of US equities sank $126 billion, or 38%, from July to March; US Treasury holdings were kept stable.
- Spot 8.3115
- USDNOK declined 0.7% to 8.2717 on the back of a weaker US dollar.