Sentiment was mixed overnight. The S&P500 is up 0.7% but Eurozone and Chinese equities closed down 2% and 3%. Crude oil is up 3%, reach highest level since 6 January in choppy trade on Saudi and Russian production comments. The US dollar is weaker as US durable goods missed reflecting the weakness in manufacturing and brings more questions over the path for the Fed.
On FOMC, The Fed acknowledged the volatility in the markets and said that it is closely monitoring the situation. The overall statement was not as dovish as the market hoped for and left investors doubting the frequency of rate hikes in 2016. The chance of a June hike now dropped from around 50% to 46%.
Bank of Japan announcement is due today around 0230-0330GMT (concluding meeting on 28-29 January). Governor Kuroda will follow with a press conference at 0630GMT. No change in policy expected today. Commentary from BOAML: “Since the last meeting the risk scenarios that the BoJ previously warned about have started to materialize. Though at the upcoming meeting we expect the BoJ to stay on hold while keeping a close eye on the market and moves by governments such as China, we maintain our view that the BoJ is likely to ease further during 1H 2016, probably around March or April.”
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