• The FOMC stood pat on rates as expected while removing the reference to global events posing risks to US outlook but stated they will continue to monitor inflation indicators, global economic and financial elements
  • BoJ kept policy unchanged with the Annual Rise in Monetary Base held at JPY 80trl and BoJ Policy Rate held at -0.10% as expected. However, refrained from any additional monetary measures
  • Looking ahead, highlights Include US Advance GDP, Unemployment Claims, German Unemployment and Inflation alongside ECB’s Liikanen, Nowotny, Linde and Costa

FOMC Rate Decision

Fed kept rates unchanged at 0.25-0.50% as expected with Fed's George the lone dissenter in favour of hiking rates by 25bps, while initial focus was on the Fed removing the reference to global events posing risks to US outlook.

However , on closer inspection of the statement itself, the Fed stated they will continue to monitor inflation indicators, global economic and financial elements. The Fed also stated it sees inflation rising to 2% in the medium term.

Due to the contrasting commentary, volatility was seen across asset classes, with treasury markets benefitting over the longer term, and equities rallying into the close on Wall Street.

Overall, there is no further clarity on whether the Fed have left June on the table or not . Of note, CME FedWatch are currently pricing in a 17% chance of a hike at the next meeting.

BoJ Rate Decision

BoJ kept policy unchanged with the Annual Rise in Monetary Base held at JPY 80trl and BoJ Policy Rate held at -0.10% as expected. However, refrained from any additional monetary measures that the market was looking for.

BoJ said it will ease in 3 dimensions if needed to reach its price target and announced to adopt loan support program for quake affected areas.

The BoJ reduced its Real GDP and Core CPI forecasts through to FY 2018 and also pushed back the timing to reach the 2% price target to FY 2017 vs. Prev. forecast H1 FY 2017. (BBG/RTRS)

ASIA

Asia equity markets trade mixed following a mild positive lead from Wall St. where an unsurprising FOMC and strength in oil provided early support, whileNikkei 225 slumped after the BoJ disappointed markets and kept monetary policy on hold. This saw a firm break below 17000 in the Nikkei 225 (-3.0%) with the index wiping out Industrial Production inspired gains. ASX 200 (+0.6%) benefited from the uptick in energy after WTI broke above USD 45/bbl to post another YTD high, while the Shanghai Comp (+0.1%) weakened amid ongoing poor earnings with state-owned CNPC the latest addition after its profits dropped over 50%. 10yr JGBs are relatively flat despite the slump in Japanese stocks as the BoJ’s inaction kept fixed-income demand subdued.

Japanese National CPI (Mar) Y/Y -0.1% vs. Exp. 0.0% (Prev. 0.3%)
Japanese National CPI Ex-Fresh Food (Mar) Y/Y -0.3% vs. Exp. -0.2% (Prev. 0.0%). (BBG)

Japanese Industrial Production (Mar P) M/M 3.6% vs. Exp. 2.8% (Prev. -5.2%); fastest increase since June 2011.
Japanese Industrial Production (Mar P) Y/Y 0.1% vs. Exp. -1.6% (Prev. -1.2%). (BBG)

Japanese Retail Sales (Mar) M/M 1.4% vs. Exp. 0.5% (Prev. -2.3%)
Japanese Retail Sales (Mar) Y/Y -1.1% vs. Exp. -1.4% (Prev. 0.4%). (BBG)

EUROPE/UK

YouGov UK EU Poll showed 41% would vote to remain in EU and 42% would vote to leave. (YouGov)

FX

Central bank inaction dictated price-action with JPY strengthening and saw USD/JPY decline over 2 points to briefly break below 108.00 after the BoJ disappointed markets by keeping policy on hold. NZD/USD surged to break above 0.6900 after the RBNZ also disappointed outside easing bets and kept the OCR unchanged at 2.25%, while mild jawboning by the central bank was largely ignored as the RBNZ also signalled concern with rising property prices, which effectively lessens the scope for further cuts.

COMMODITIES

Oil prices traded relatively flat overnight to retain the most of the prior session’s gains where WTI climbed above USD 45/bbl and print fresh YTD highs . Gold (-0.1%) rebounded of its lows amid safe-haven inflows following the BoJ’s disappointment, while copper prices were subdued amid the dampened tone in China.

US

In Fixed Income markets, analysts at Informa highlighted that real money accounts were persistent buyers of the belly of the curve, while outperformance in the long-end of the curve was seen after the FOMC rate decision. Many noted that the recent decision provided minimal clarity on June and the question of whether June remains on the table has gone (for the large part) unanswered. T-notes closed the pit higher by 19+ ticks at 129.25.