US stock markets staged a strong rebound overnight after the dovish FOMC minutes suggested that rate hike is not imminent. Both DOW and S&P 500 drew strong support from 55 days EMAs and closed higher by 1.11% and 1.09% respectively. However, positive sentiments didn't carry through to Asian session and markets initial gains follower weak China trader. The dollar extended recent broad based decline while the Japanese yen retreated sharply on risk appetite. Dollar's break of near term support against Euro and Swiss franc aligned the outlook with other dollar pairs and we'll likely see some more weakness in the greenback ahead. Meanwhile, we're still waiting for the trigger for downside breakout in yen crosses.
The FOMC minutes for the March meeting reinforced the Fed's dovish view over the US economic developments. Policymakers were apparently divided on the outlook of the employment market as there was a range of views regarding how much slack remained. Concerning the forward guidance, policymakers were in line to stress that the change of guidance from quantitative to qualitative did not reflect a change in the Committee's policy intentions. More in Fed Downplayed Rate Hike Possibility, Diverged On Interpretation of Employment Market Slacks.
Australian dollar jumps in Asian session after stronger than expected job data. The employment market grew 18.1k in March versus expectation of 2.5k. Unemployment rate also dropped to 5.8% versus expectation of 6.1%. However, the details were much less impressive as firstly, the growth in employment was mainly driven by part-time jobs, which jumped 40k. Full time employment has indeed dropped 22k. Secondly, the fall in unemployment rate was more due to a fall in participation rate from 64.9% to 64.7%. Overall, the data is still supportive to RBA's neutral stance to keep interest rates steady for a period of time. Also released from Australian, consumer inflation expectations rose 2.4% in April. From New Zealand, business manufacturing index rose to 58.4 in March.
In China, trade surplus cam in much wider than expected at USD 7.71b in March, comparing to expectation of USD 1.8b and prior month's USD -22.98b deficit. Exports dropped -6.6% yoy while imports dropped even more by -11.3% yoy. The data is seen as sign of weak domestic demand and investment demand. Also, with the lunar new year factor behind, the data provided further evidence that the Chinese economy is suffering a broad slowdown in Q1.
Looking ahead, BoE rate decision is a main focus today and the central bank is expected to keep rates unchanged at 0.50% and asset purchase target at GBP 375b. It's likely that only a brief statement will be released and thus, it would likely be a non-event. Later in the US session, US will release jobless claims, and import price index while Canada will release new housing price index.