11/19/2014 THE BIG PICTURE BoJ members show more agreement The Bank of Japan ended its two-day policy meeting and kept its massive stimulus program intact as was widely expected. Board member Takahide Kiuchi was the only dissenter of the current quantitative easing program in an 8-1 vote. This shows more agreement than on Oct. 31st, when the vote to increase the stimulus was divided into a 4-5 split. On Tuesday, Prime Minister Shinzo Abe announced that he was delaying the next hike in the consumption tax (initially scheduled for October 2015) and called a snap election as a referendum on the tax, likely in mid-December. Following the country’s GDP contraction on Monday, the various forthcoming data if weak, would likely keep the JPY under selling pressure. The New Zealand dollar weakened the most against the dollar, after dairy product prices fell in the latest auction to the lowest level in more than five years. This pushed the NZD 1M volatility up approximately 4% to the levels seen in the beginning of 2014. Today’s events: The focus will most likely be on the minutes from the latest Bank of England policy meeting. After the inflation report, where the Bank downgraded its growth and inflation forecasts and said that the inflation rate is likely to fall below 1% within 6 months, it will be interesting to see if Weale and McCafferty continued supporting a 25bps rate hike. Besides the BoE meeting minutes, we get the minutes of the Oct.28-29 FOMC meeting. Here we will get more details on the decision to end the QE3 program and the view of the Fed members of an improving labor market. I believe that the market will also look for clues on when the Committee is considering to start raising rates. On the other hand, in their previous minutes, the Fed mentioned that a stronger dollar and a slower global growth are risks to the US economy. Since the release of September 16-17 FOMC meeting minutes, the DXY index has appreciated approximately 3% and the global growth showed signs of further weakness (Japan’s GDP: -0.4% qoq, Germany’s GDP: just 0.1% qoq and Eurozone’s 0.2% qoq, all for Q3). The risk that the Fed could reiterate its concern given these developments, could put a downward pressure on the USD. As for the indicators, from Europe we get only Eurozone’s current account balance for September. In the US, both housing starts and building permits for October are expected to have increased indicating that the housing sector is growing again after a soft summer. The strong figures support the strength in the broader economy. Near the US closing, we have New Zealand’s PPI for Q3 coming out. However, no forecast is available. We have four speakers scheduled during the day: ECB executive Board member Peter Praet, BoE MPC member Nemat Shafik, Norges Bank Governor Oeystein Olsen and Riksbank Deputy Governor Martin Floden.
Posted on: Wed, 19 Nov 2014 10:05:31 +0000
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