US equities reversed early gains and closed lower overnight after Fed statement. DJIA lost -222.77 pts, or -1.38%, to close at 15944.46. Nonetheless, resilience in oil price, which is back above 32, is supporting Asian equities, which trade mildly higher at the time of writing. Fed kept interest rate unchanged at 0.50% as widely expected. In the accompanying statement, Fed noted that it is "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook". Nonetheless, Fed is still expectation economic activity to "expand at a moderate pace and labor market indicators will continue to strengthen". Without a drop of any hint of further tightening, the chance of a March hike continue to lower and markets are only pricing in 25% chance. Some analysts also noted that the statement showed policy makers were more concerned with the global developments. The chance of a June hike also dropped slightly from around 50% to 46%.
RBNZ left the official cash rate unchanged at 2.50%. The central bank noted in the statement that "some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range." It expected that inflation to "take longer" to return to target range. Also, the central bank noted the "many risks" around the economic outlook. "These relate to the prospects for global growth, particularly around China, global financial market conditions, dairy prices, net immigration, and pressures in the housing market." Kiwi is generally lower as the statement affirmed the easing bias and the odds of further rate cut ahead. Also released from New Zealand, trade deficit narrowed to NZD -53m in December.
Elsewhere, Japan retail sales dropped -1.1% yoy in December. Australian import price dropped -0.3% qoq in Q4. UK GDP is the main focus today and is expected to show 0.5% qoq in Q4. UK will also release index of services and CBI reported sales. Eurozone will release confidence indicators and German CPI. In US, focus will turn to durable goods, pending home sales and jobless claims.