Markets reaction to FOMC,RBNZ and BOJ preview- by – Michael Oyebamiji

Just as expected, there was no surprise in the FOMC minutes from last night. The FOMC highlighted some risk from china and possible impact on the US economy and the world at large. They also indicated that low inflation is due to low oil price which will soon move to the 2% target. The Reserve bank of New Zealand (RBNZ) also came out absolutely dovish by indicating further depreciation of the kiwi is needed to drive economic growth and there is a possibility of a rate cut in 2016.

Market’s reaction all the statements from last night was a dovish one, NZD dropped against all major pairs and also the stock market also closed in the red from a massive sell off on the back of the dovish FOMC. Euro rallied from the lows of 1.08 to 1.09.

From the FOMC statement, it is clear the FED will likely raise rate in the next meeting (March). I expect more USD strength and more downside on major global equities.

Later tonight/early hours of Friday, the Bank of Japan will hold a press conference to give market some insights into the future of Japanese economy. It is clear that the BOJ is quite optimistic at reaching the 2% inflation target in 2016. This means in their speech tonight, they might introduce more measures to boost economic growth with will in turn drive inflation. Trader will keep an eye on the JPY crosses. JPY has been really strong over the past couple of weeks. An introduction of more stimulus will see some weakness on the JPY.