The June FOMC Meeting Has Arrived
June 17, 2015
This week’s FOMC decision (due today at 18:00 GMT) and Yellen press conference (starting 30 minutes later) have been eagerly awaited ever since monetary officials signaled that their data-driven policy could begin to raise the federal funds rate as early, but not before, the June meeting. Analysts are not expecting that to happen but are keenly awaiting any clarification of forward guidance that might be signaled in the FOMC statement, Yellen’s comments, or new forecasts from the Open Market Committee.
Greek talks are still stalemated, leaving the possibility of Grexit within a few weeks.
Share prices overseas are mixed. There were gains in the Pacific Rim of 1.5% in China and Indonesia, 1.1% in Australia, 1.0% in Hong Kong, 0.6% in India, and 0.8% in Singapore along with losses of 0.2% in Japan, 1.0% in New Zealand and 0.3% in Taiwan. In Europe, stocks are unchanged in Great Britain and Italy but down by 0.7% in France, 0.5% in Switzerland, 0.3% in Germany and 0.1% in Greece and Spain.
Movements overnight in the dollar also have been diverse with gains amounting to 1.0% relative to the New Zealand and Australian dollars, 0.5% versus the yen, and 0.2% vis-a-vis the loonie but losses of 0.6% against sterling, 0.4% versus the Swiss franc and 0.1% against the euro. The yuan is unchanged.
The ten-year German bund and Japanese JGB yields are unchanged, but the 10-year British gilt rose six basis points.
West Texas Intermediate crude oil leaped 2.0% to $61.17 per barrel. Comex gold, in contrast, has drifted 0.2% lower to $1,178.50 per troy ounce.
The Japanese trade deficit in May shrunk further, but so did the level of exports and imports relative to April. The deficit was JPY 182 billion on a seasonally adjusted basis, down from JPY 240 billion, and JPY 216 billion unadjusted, down from JPY 917 billion a year earlier.
A 15% on-year rise in Japanese machine tool orders was confirmed. That’s better than April’s 10.5% increase but below a gain of 21.4% in the first quarter.
Released Bank of England MPC minutes from the meeting earlier this month that left policy unchanged were a bit hawkish. There is less ambiguity that the next policy change will be a tightening move, and the decision though unanimous was “finely balanced” for two of the nine committee members. The minutes declare that future policy will be dictated by the evolution of the output for British inflation, not what other central banks might be doing.
British labor statistics revealed more tightness than expected. Wage growth in April of 2.7% on year was the greatest since August 2011 for total compensation and since February 2009 for regular pay only. The ILO-basis jobless rate of 5.5% in February-April was the lowest since 2Q08 and down from 6.6% a year earlier. The claimant count of unemployed workers fell by another 6.5K in May.
New Zealand posted a 1.779 billion kiwi seasonally adjusted current account deficit in the first quarter of 2015, down from NZD 2.53 billion in 4Q14 and the smallest shortfall in a year. The deficit over the last four reported quarters amounted to 3.6% of GDP, up from 2.6% of GDP in the previous four-quarter span, but lower oil prices suggest this ratio will drop in coming quarters. The unadjusted current account was a NZD 662 million surplus last quarter, the first black-ink result since 1Q14.
According to Westpac, Australia’s index of leading economic indicators slipped 0.1% in May after stagnating in April.
Construction output in the eurozone rose 0.3% on month in April and was unchanged on year after a 1.4% decline between 1Q14 and 1Q15.
Consumer prices in the euro area according to final estimates rose 0.2% on month in May and were 0.3% higher than a year earlier. Such had risen 0.5% in the year to May 2014. Core inflation accelerated 0.3 percentage points to 0.9% in May and was also above the 0.7% rate in the prior year to May 2014. Energy prices jumped 0.9% on month. In the year to May, prices for services and food, alcohol and tobacco respectively went up 1.3% and 1.2%. The region appears to have averted deflation for now, thanks to the ECB’s preemptive policy accommodation but also to more stable world oil prices.
The Swiss ZEW expectations index, a gauge of investor sentiment, printed at 0.1 in June after -0.1 in May.
Italy’s trade surplus of EUR 3.52 billion in April was 9.5% narrower than in March. The unadjusted EUR 3.736 billion surplus was 6.7% wider than a year before.
Swedish consumer sentiment weakened 1.1 points to 97.9 in June. Industrial confidence also softened. Austrian CPI inflation held steady at 1.0% in May.
Singapore’s trade surplus rose 12.4% to SGD 6.61 billion in May. South African consumer prices rose 4.6% in the year to May, the highest rate thus far in 2015, but on-year growth in retail sales slowed to 3.3% in April from 4.1% in March.
U.S. data this Wednesday will be limited to weekly oil inventories. Today’s FOMC decision will be followed by central bank announcements on Thursday by Switzerland, Norway and Indonesia.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British labor market statistics, Euroland CPI, FOMC, New Zealand current account