Yen is mixed today after BoJ kept policies unchanged as widely expected. The central bank will continue to expand the monetary base by JPY 80T annually. Interest rate was held near to zero level. Growth projection for the current fiscal year to March 2016 was lowered to 1.7%, down from prior forecast of 2.0%. Growth is expected to slow to 1.5% in fiscal 2016, and 0.2% in fiscal 2017. CPI projection for same period was lowered to 0.7%, down from 0.8%. For 2016 fiscal year, CPI forecast was lowered to 1.9%, down from 2.0%. That for fiscal 2017 was lowered to 1.8%, down from 1.9%.
In China, equities dropped although the government reported that GDP growth in the second quarter stayed at 7%, whilst a series of June macroeconomic data beat expectations. The National Bureau of Statistics reported that GDP of the world's second largest economy grew 7% yoy in 2Q15, same pace as a quarter ago but exceeded consensus of 6.8%. Activities in June also performed better than the market had anticipated. Retail sales rose 10.6% yoy in June, up from 10.1% in May and expectations of 10.2%. Industrial production expanded 6.8% in June, accelerating from 6.1% in May and exceeded the 6% growth anticipated by the market. Hot weather probably helped the growth through power generation. Urban FAI grew 11.4% in the first 6 months of the year, compared with 11.4% in the first 5 months and expectations of 11.2%. The strength appears to be mainly due to the increase in infrastructure and urban rebuild activities funded by the central government, while private investment remained limited.
In Eurozone, Greek parliament is expected to vote on the reforms required to secure the new bailout for the country. Approval from the parliament is a prerequisite for other Eurozone leaders to start negotiation over the three year bailout that is worth up to EUR 86b. Details of the reform could be find in Greek Agreed on Tough Deal, Implementation is Key. IMF said in its latest assessment on Greece that "the dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date-and what has been proposed by." And, IMF warned that deeper debt relief is needed and even extending debt maturities deep into second half of the century may not be enough.
Looking ahead, BoC rate decision and testimony of Fed chair Janet Yellen will be the main focus today. Markets are pricing in over 40% chance of rate cut by BoC from 0.75% to 0.50%. The weaker than expected April GDP and retail sales were seen as a factor. Recent slump in crude oil, which is back around 53, is also seen as another factor that might push BoC for an earlier cut. USD/CAD is facing 1.2834 resistance for the moment in either case, cut or not cut, there will be some volatility. Meanwhile, Fed Chair Janet Yellen would present the Humphrey-Hawkins testimony. We expect Yellen would emphasize in her speech that, should the incoming data broadly support the central bank's latest forecasts, a rate hike would be warranted by the end of the year.
On the data front, UK employment data will be the main focus in European session together with Swiss ZEW. Canada will release manufacturing shipments. US will release PPI, Empire state manufacturing, industrial production as well as Fed's Beige Book.