Investors’ Focus Shift to Bank of Japan
After a two-day meeting of the Federal Open Market Committee, the central bank left its interest rates unchanged. Fed policy makers upgraded their forecasts for growth and unemployment this year while repeating their view that borrowing costs are likely to remain “exceptionally low” at least through late 2014. Fed Chairman Ben Bernanke said “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target”. He also said “Those tools remained very much on the table and we would not hesitate to use them should the economy require that additional support. For the time being, it appears that we are more or less in the right place”.
Investors looked at the FOMC statement and saw no mention of QE3, but in his press conference, Bernanke made it quite clear that additional asset purchases remain completely on the table. In fact the FOMC’s comments were in line with expectations and the U.S. market reaction was fairly limited. Fed officials estimated the economy will expand 2.4% to 2.9% this year, compared with a January forecast of 2.2% to 2.7%. They see growth of 2.7% to 3.1% in 2013 and 3.1% to 3.6% in 2014. However another report yesterday showed that durable goods orders fell 4.2%, the biggest drop in three years. The report was the latest to show softness in U.S. economic data.
Investors’ focus will turn to Japan and BoJ meeting on Friday. Market participants widely expect the BOJ to further ease policy at its meeting on Friday by expanding its 65 trillion yen ($796.5 billion) asset-buying and loan program by 5trillion or 10 trillion yen, with the increase to be used to buy government bonds. But the market is scared of the BoJ’s decision falling short of expectations.
The Asian stock markets opened slightly higher today. NIKKEI started the day at 9,613.16, previous close was 9,561.01. HANG SENG opened at 20,753.20, previous close was 20,646.30. Equity general manager at SMBC Nikko Securities, Hiroichi Nishi said “Although Tokyo markets were stronger in the previous session, trading volume still lacks momentum. Investors are still cautious ahead of more domestic corporate results and the BOJ meeting on the 27th”.
EUR/USD is trading at 1.3218 by the time of typing and for today resistances are located at 1.3242 and 1.3305. Support levels are 1.3180 and 1.3145.
GBP/USD is at 1.6168. Resistance levels are located at 1.6200 and 1.6240. Supports are located at 1.6099 and 1.6040.
USD/CHF is trading at 0.9086 by the time of typing and for today resistances are located at 0.9115 and 0.9158. Support levels are 0.9071 and 0.9027.
AUD/USD is trading at 1.0370. Resistances are located at 1.0398 and 1.0432. Support levels are 1.0340 and 1.0281.
The economic calendar is light today. UK BBA Mortgage Approvals data will be released at 09:30 GMT. UK CBI Realized Sales figures will be announced at 11:00 GMT. U.S. Unemployment Claims data will be released at 13:30 GMT. U.S. Pending Home Sales report will be released at 15:00 GMT.