Daily FX Update – 28th April 2016
So finally we can now focus on economic fundamentals in terms of normalising monetary policy? Well the FOMC removed the verbiage regarding the global risks but also mentioned that domestic activity had slowed. It also removed reference to a pick up in inflation so net net it was one for the doves. That being said, there wasn’t a great deal of difference between what they said in March. The Buck reacted in a typically whipsaw manner and overall not a great deal has changed. The question will now be will we get the two hikes which was already diminished against the amount we expected to get, or will it be one.
The bigger surprise came overnight in the form of the Bank of Japan’s decision to not add any further stimulus measures and to keep the existing policy unchanged; Kuroda citing much like Draghi that existing measures implemented in January, needed further time to be monitored for their impact. USDJPY reacted immediately with close to a 300 pip sell-off but the outlook here for Japan, much like the EU hasn’t changed so the rally is likely to be met with buying interest for the pair.
The UK held on to gains despite a 0.4% reading in Q1 GDP against 0.6% the previous quarter. This was likely a sigh of relief amongst investors who had feared that Brexit may have had more of an impact. Coming in to this morning and despite a fairly dovish Fed, we’ve come off the highs so one to keep an eye on as we approach the long weekend / month end.
Focus today turns to the US with advance GDP, initial jobless claims and PCE numbers. In advance of this we also have German unemployment and inflation numbers, EU business climate, employment change and consumer sentiment as well as various ECB members also taking to the wires.
Have a good day.