Daily Morning Report 28.01.2016

The New Zealand dollar gained on Thursday despite the central bank holding rates steady and reverting to an easing bias, while investors decoded the Federal Reserve move to hold steady with few signals on the timing of any future hikes.

In Japan, retail sales fell 1.1%, weaker than the 0.1% year-on-year drop seen in December. In Australia, the import price index fell 0.3%, better than the 0.8% drop expected, and the export price index fell 5.4%, more than the 3.8% decline seen.

Federal Reserve policymakers left interest rate settings unchanged Wednesday as their first Federal Open Market Committee meeting of 2016 ended amidst global financial turmoil and economic anxiety

The FOMC, which raised the federal funds rate by 25 basis points after seven years near zero Dec. 16, gave no hint of when it might raise that and other short-term interest rates again, although its acknowledgment of threats from “global economic and financial developments” could potentially mean greater delay.

Neither did it give any indication it is backing away from the “gradual” rate normalization strategy announced last month.

The vote to keep the funds’ rate in a target range of 25 to 50 basis points was unanimous.

Elsewhere, the Reserve Bank of New Zealand left the official cash rate unchanged as widely expected but reverted to an easing bias just one meeting after it changed its stance for steady interest rates.

In a statement Thursday, the RBNZ said headline inflation is expected to increase over 2016 but it will now take longer to reach the target range than previously expected, indicating an easing may be required to achieve this earlier.

“Monetary policy will continue to be accommodative. Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range,” the RBNZ said.

“We will continue to watch closely the emerging flow of economic data,” the RBNZ said.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted up 0.01% at 99.03.

Overnight, the dollar pared losses against the other major currencies on Wednesday, after the release of upbeat U.S. housing sector data.

The U.S. Commerce Department said new home sales rose by 10.8% to 544,000 units last month, compared to expectations for a gain of 2.0% to 500,000. New home sales in November were revised up to 491,000 units from a previously reported 490,000 units.