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Novedades sobre el Intercambio Extranjero (en Inglés)

March 20, 2019

United States (US): FOMC Minutes

USD dropped against major currencies after Fed released a more dovish statement on its monetary policy and economic outlook. Fed held interest rate steady at 2.25% - 2.50% as widely expected and indicated that no more rate hikes will be coming in 2019. In a unanimous move that coincides with market expectations and demands, the FOMC took a sharp dovish turn from policy projections just three months earlier. Committee members had estimated in December that two rate hikes would be appropriate in 2019 after four increases in 2018.

For 2019: Current Median Projection Previous Median Projection
GDP Growth 2.1% (↓) 2.3%
Unemployment 3.7% (↑) 3.5%
Inflation 1.8% (↓) 1.9%

Notable changes in the statement are:

  1. The updated dot plot shows a majority of FOMC members (11 of 17) don’t see the need for any rate hikes this year; the median call is for just one rate increase in 2020.
  2. Labor market is seen as “remains strong”, downgrade from “continued to strengthen”.
  3. Growth of economic activity “has slowed from its solid rate”, downgrade from “rising at a solid rate” in fourth quarter.
  4. Job gains have been “solid”, downgrade from “strong”.
  5. Household spending points to “slower growth in the first quarter”, downgrade from “continued to grow strongly”.
  6. Business fixed investment points to “slower growth in the first quarter”, downgrade from “moderated from its rapid pave earlier last year”.
  7. Overall inflation “has declined, largely as a result of lower energy prices”, downgrade from “remain near 2 percent”.

In a separate statement, the Fed announced plans on slowing the reduction of its holdings of Treasury securities. Currently the Fed is allowing redemptions on USD 30 billion of Treasuries a month, which it will slow to USD 15 billion and halt the drawdown altogether at the end of September. After that, the Fed will likely hold the size of the portfolio “roughly constant for a time,” which will allow reserve balances to gradually decline.

New Zealand: Current Account Deficit
New Zealand dollar traded at 68.85 U.S. cents at 2:00 pm PST
 
New Zealand’s current account deficit widened NZD 2.5 billion in Q4 which brought current account deficit for 2018 to NZD 11.0 billion (3.7% of GDP) from NZD 8.2 billion (2.9% of GDP) deficit for 2017. In Q4, the goods deficit widened by NZD 109.0 million to NZD 1.0 billion, while services surplus rose NZD 16.0 million to NZD 1.1 billion.
 
United Kingdom (UK): Brexit, CPI, PPI
British Pound traded at 1.3200 against USD at 2:00 pm PST.
 
PM May had written to European Council President Tusk to formally request a delay to Brexit. She added that she was “not prepared to delay Brexit any further” than June 30. Tusk later said that a short extension “should be possible,” but on one condition – that the UK Parliament passes May’s Brexit deal. However, European Commission President Juncker had “formally warned” May against delaying Brexit beyond May 23rd, otherwise EU risk facing institutional difficulties and legal uncertainty given the European Elections.
 
UK inflation unexpectedly accelerated 1.9% YoY in February following 1.8% increase in January, better than expected for the inflation rate to remain unchanged. A modest rise in food, alcohol and tobacco prices helped push up inflation. Core CPI slowed to 1.8% in February from 1.9%. PPI rose 2.2% YoY in February, faster than the 2.1% in January. Input prices rose 3.7% in February, following 2.6% growth in January.
 
Japan: Monetary Policy Meeting Minutes
Japanese Yen traded at 110.69 per USD at 2:00 pm PST.
 
BoJ’s monetary policy minutes showed policymakers disagreed on how quickly the central bank should ramp up monetary stimulus as heightening overseas risks threatened to derail economic recovery. One member said the BoJ must stress its readiness to take “quick, flexible and bold” action including additional easing.

PLEASE CALL THE FX DEPARTMENT AT (626) 279-3235 FOR THE MOST CURRENT RATE
  
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.

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