The financial markets are steady as eyes now turn to FOMC rate decision. DJIA recovered from initial dip overnight and closed slightly higher by 22.4 pts, or 0.13% at 17251.53. Asian markets are mildly mixed with Nikkei down -0.5% at the time of writing while China SSE (LON:SSE) is up 0.1%. Other than Fed, a development to watch is crude oil which dropped this week on news that Iran is not joining production freeze. WTI reached as low as 35.98 yesterday and is now at around 36.8. In the currency markets, dollar is generally higher for the week, except versus yen but momentum is weak. Yen jumped yesterday after BoJ stood pat but is talked down by BoJ governor today. Sterling and Kiwi are leading the way down.
Fed is widely expected to keep interest rate unchanged at 0.50% today. In addition to the accompany statement, Fed will also release updated economic projections while chair Janet Yellen will hold a post meeting press conference. Markets are reviving bet on hike by Fed by end of first half. As of yesterday, fed fund futures are pricing in 48% chance of a 25bps hike by June, comparing to around 30% earlier in the month. FOMC might acknowledge improvements in the financial markets comparing to the beginning of the year. Meanwhile, inflation projections could be revised up due to rebound in oil prices. However, rate projections, the dot plot, could be revised lower to reflect more gradual rate path.
In Japan, BoJ governor Haruhiko Kuroda said in parliament today that there is room for the central but cut interest deeper into negative territory. And, he noted that -0.5% is theoretically possible. He also noted that if necessary, BoJ is also prepared to unleash extra stimulus through expanding the asset purchase program. BoJ left monetary policies unchanged yesterday as widely expected. Interest rate was held at -0.1% and the target of monetary base expansion was kept at JPY 80T per annum. Yen jumped yesterday as Kuroda noted that time is needed to gauge the impact of the negative rate policy.
On the data front, New Zealand current account deficit narrowed to NZD -2.61b in Q4. Australia Westpac leading index dropped -0.2% mom in February. UK job data will be the main focus in European session together with budget release. US will release new residential constructions, CPI and industrial production.