Dollar tumbles overnight while US equities strengthened as FOMC pared outlook for rate hike this year. DJIA extended recent rebound and closed up 74.23 pts, or 0.43%, at 17325.76. S&P 500 also closed up 11.29 pts, or 0.56%, at 2027.22. Risk appetite carries on in Asian session with Nikkei trading up 235 pts, or 1.4%, at the time of writing. Gold rebounded strongly following dollar's weakness and is trading around 1250 while Crude oil resumed recent rise and hit as high as 39.38 so far. Dollar index took out last week's low and reaches as low as 95.53. Dollar suffered broad based selling. In particular, the greenback broke recent support against Euro, Swiss Franc, Australian dollar and Canadian dollar.
Fed left interest rate unchanged at 0.50% as widely expected. Based on the updated projections, policymakers now expected federal funds rate to climb to 0.875% by year end, equivalent to at most two 25bps rate hike only. That's a drastic change from December's projection of 1.4% by end of 2016, equivalent to four 25bps hike. Fed funds rate is projected to be 1.875% by the end of 2017, down from prior forecast of 2.375%. In accompanying statement, Fed noted that "a range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months." But "global economic and financial developments continue to pose risks."
More on FOMC:
- Dovish Fed Signals Only Two Rate Hikes This Year, Down From Four
- FOMC: A Cautious Fed Lowers Rate Expectations
- US FOMC Maintained Fed Funds Target Range at 0.25 to 0.50%
- Concerned Fed Sends Very Dovish Message to the Markets
SNB and BoE rate decisions will be the focuses next. Opinions on what SNB would do is divided. There are talks that, in response to ECB's easing, SNB might shift the range of its 3-month LIBOR rate to -0.5% and -1.5% from the current -0.25% and -1.25%. However, as EUR/CHF is held well inside recent range, SNB might opt for standing pat instead. Nonetheless, SNB could have a dovish tone in the accompanying statement and indicates that it's ready to act if necessary. BoE is also expected to keep its powder dry. Indeed, we do not see high chance of any move ahead of the June 23 referendum on whether Britain should remain in the European Union.
On the data front, New Zealand GDP rose 0.9% qoq in Q4, above expectation of 0.7% qoq. Australia employment rose 0.3 in February versus expectation of 12.3k but unemployment dropped to 5.8%. Japan trade surplus widened slightly to JPY 0.17T in February. Swiss will release PPI, Eurozone will release trade balance and CPI in European session. Canada will release wholesale sales. US will release current account balance, Philly Fed survey, jobless claims and leading indicators.