The Bank of Japan has scrapped negative interest rates, hiking for the first time in 17 years, but the yen fell because the BoJ sees no rush to hike again. US Treasury yields also fell ahead of the Fed’s decision tonight. The RBA held, but turned slightly dovish, which pushed the Aussie dollar down.
In our bonus deep dive interview, ANZ Commodities Strategist Soni Kumari looks at how record US oil output changes the outlook for oil prices this year.
5 things to know:
The BoJ hiked 10 bps to 0.0%, replaced its yield curve control programme and end ETF purchases. ANZ Senior International Economist Tom Kenny says the main news was Governor Kazuo Ueda’s dovish guidance.
That dovish guidance weakened the yen and pushed up the Nikkei. ANZ FX Analyst Felix Ryan says uncertainty about future hikes and the soft Japanese economy mean there’s not much of a headwind for the US dollar vs the yen.
US Treasury yields fell 3 basis points by 4am Sydney/Melbourne time as the focus turns to the FOMC. ANZ Head of G3 Economics Brian Martin says markets are 60% priced for a 25 bps cut in June and fully priced for a July cut.
The Reserve Bank of Australia yesterday held its cash rate at 4.35%, as expected. ANZ Head of Australian Economics Adam Boyton says traders saw the RBA’s commentary as more dovish. The Aussie dollar is down 0.5% at 65.28 US cents at 4am Sydney/Melbourne time. The Kiwi is down 0.55% at 60.49.
Adam still sees the RBA cutting from November, after gauging how July’s stage-three tax cuts will percolate through the economy.
Cheers
Bernard
PS: Catch you tomorrow with the details of the FOMC decision.
