Article Highlights

  • U.S. ADP non-farm employment change up 246K vs. 165K forecast
  • U.S. ISM manufacturing PMI up from 54.7 to 56.0 vs. 55.0 consensus
  • U.S. crude oil inventories up by 6.5M barrels vs. 2.6M forecast
  • FOMC kept interest rates unchanged at <0.75% as expected
  • Fed ditched reference to transitory effects of energy prices on inflation
  • FOMC: Risks are roughly balanced, consumer and business sentiment improved
  • FOMC: Business investment remained soft
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Nope, no surprises from the FOMC! The Fed made a couple of noteworthy changes in its statement but these weren’t enough to help the Greenback hold on to its gains.

Major Events:

FOMC kept interest rates on hold – As expected, Fed officials made a unanimous decision to sit on their hands for the time being, keeping rates unchanged at 0.50-0.75%. Policymakers confirmed that economic conditions warrant gradual rate hikes and that they’ve made no changes to their longer-term goals.

On a slightly hawkish note, Fed officials assessed that measures of consumer and business sentiment have improved lately. They also ditched the phrase downplaying the earlier rebound in inflation as “partly reflecting earlier declines in energy prices and in prices of non-energy imports,” which means that they think the pick up in price levels these days is the real deal. Still, the FOMC maintained that business investment is still soft and that risks remain roughly balanced. Read the full FOMC statement here.

Upbeat U.S. economic data – Providing a solid backdrop to the relatively upbeat FOMC statement is the latest batch of reports from Uncle Sam. First off, the ADP non-farm employment change printed an impressive 246K increase versus the projected 165K gain and the previous 151K rise. This signals that the jobs market is off to a roaring start for the year, hinting that this Friday’s NFP release might turn out stronger than expected as well.

Meanwhile, the ISM manufacturing PMI also surpassed expectations by rising from 54.7 to 56.0, higher than the projected 55.0 figure. Underlying data indicated that the prices component jumped from 65.5 to 69.0 to reflect stronger inflationary pressures while the employment sub-index surged from 52.8 to 56.1, also reflecting faster jobs growth in January. The components for production, new orders, and supplier deliveries also ticked higher while imports and new export orders were lower.

Major Market Movers:

USD – Not even Beyoncé’s pregnancy announcement was enough to boost the U.S. dollar’s spirits, as traders seemed disappointed with the FOMC statement.

EUR/USD initially dropped from 1.0801 to a low of 1.0731 but scurried back up to 1.0789, GBP/USD dipped to a low of 1.2613 then climbed to 1.2675, USD/JPY rallied to a high of 113.95 then turned back down to 113.00, and USD/CHF fell upon hitting resistance around the .9950 minor psychological mark.

Watch Out For:

  • Chinese banks still closed for the holiday
  • 12:30 am GMT: Australian building approvals (-1.7% expected, -7.0% previous)
  • 12:30 am GMT: Australian trade balance (2.00B AUD expected, 1.24B AUD previous)
  • 5:00 am GMT: Japanese consumer confidence index

See also:

London Session Recap

Asian Session Recap

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