The Greenback mostly shrugged off the FOMC statement as the central bank kept rates on hold as expected. Dollar traders appear more interested in the announcement of the tax plan and next Fed Chair head.
Meanwhile, commodity currencies led the pack while the lower-yielding yen and franc lagged behind as risk-taking was in full swing.
- FOMC kept interest rates unchanged at 1.00-1.25% as expected
- FOMC: Economic activity rising at “solid rate”
- FOMC: Long-term inflation measures were little changed
- ADP non-farm employment up by 235K vs. 202K forecast
- U.S. ISM manufacturing PMI fell from 60.8 to 50.7 vs. 59.5 consensus
- U.S. EIA crude oil inventories down by 2.4 million barrels
- SNB member Zurbrugg: CHF remains overvalued
- BOC head Poloz: Central bank more cautious about next hikes
FOMC policy statement
No surprises here! The FOMC announced their decision to keep interest rates on hold at 1.00-1.25% this month while making very little changes to their policy statement.
In particular, policymakers changed their assessment of economic activity from “rising moderately” to “rising at a solid rate” despite the recent hurricanes.
When it came to price levels, central bankers reiterated that measures of long-term inflation were little changed and that pressures remain soft even after gains in gasoline prices after the storms.
As for the jobs market, they repeated that the labor market continues to strengthen. Fed officials also noted that household spending is expanding at a moderate rate and that business investment has picked up in recent quarters. With that, they concluded:
“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
The statement also confirmed that the balance sheet normalization program started last month is still carrying on.
Mixed U.S. data
Actual economic figures painted a mixed picture of the economy, keeping traders guessing on how the NFP report due later this week might turn out.
The ADP non-farm employment change reading was higher than expected at 235K versus the estimated 202K reading, but the earlier figure was downgraded from 135K to 110K.
The ISM manufacturing PMI fell short of expectations as it posted a steeper drop from 60.8 to 58.7 for October, lower than the projected dip to 59.5. Underlying data showed that the prices component had a smaller than expected fall from 71.5 to 68.5 while the jobs sub-index also fell from 60.3 to 59.8.
Meanwhile, the Markit version of the manufacturing PMI was upgraded from 54.5 to 54.6 to reflect a slightly faster pace of industry expansion than initially reported.
Construction spending rose by 0.3% instead of falling by the estimated 0.1% figure, and total vehicle sales fell from 18.6 million to 18.1 million.
U.S. equities soar on risk-taking
Upbeat earnings data from the likes of Facebook boosted Wall Street for the most part of the session, buoying equity indices to stronger levels.
- Dow 30 index is up 0.25% to 23,435.01
- S&P 500 index is up 0.16% to 2,579.36
- Nasdaq is down 0.17% to 6,716.53
Bond yields are mixed, with longer-term maturities in the red.
- U.S. 10-year bond yield down 0.09% to 2.374%
- U.S. 2-year bond yield up 1.25% to 1.616%
Major Market Mover(s):
CHF & JPY
The franc managed to shrug off a bit of jawboning from SNB official Zurbrugg while the yen took some hits as traders took on more risk.
NZD/CHF is up to .6903 (+1.03%), NZD/JPY is up 79 pips to 78.59 (+1.04%), AUD/CHF is up to .7698 (+0.80%), USD/JPY is up to 114.19 (+0.48%)
The higher-yielding comdolls took advantage of the positive mood in the financial markets and advanced across the board.
AUD/USD is up to .7673 (+0.24%), NZD/USD is up to .6884 (+0.55%), USD/CAD is down to 1.2867 (-0.16%), GBP/NZD is down to 1.9235 (-0.82%), and GBP/CAD is down to 1.7040 (-0.45%).
Watch Out For:
- 1:30 am GMT: Australian trade balance (1.42B AUD surplus expected)
- 1:30 am GMT: Australian building approvals (0.9% decline expected)
- 6:00 am GMT: Japanese consumer confidence index (dip from 43.9 to 43.6 expected)