Did China dazzle the Fed?

A busy day with the Fed and Boj coming out with policy statements and interest rate decisions. For the Fed no change in rates is expected but rather the language of when the Fed looks to raise rates is going to be important. What will be important to look for is if members note global risks to the downside, such as China, in their statement. In the past this is what was looked at by the markets to determine if a rate increase was on the horizon. Things have changed in terms of growth in China and the numbers being presented are looking better than the start of the year. However this is due to large amounts of borrowing that was enacted to boost the Chinese economy. It will be interesting to see if the Fed looks past the headlines ad talks of continued weakness towards China of takes the numbers for what they are and talks a more hawkish note towards inflation.

​The Bank of Japan will take some of these cues from the Fed statement, but has mentioned recently that they are satisfied with the results of negative rates. With more of the numbers in Japan starting to turn negative and the Yen up to 111 to the dollar the trend does not match with the recent language of the central bank and some are expecting more stimulus in the coming months, perhaps even at this meeting. If the outlook is still displayed as rosy and optimistic, you will no doubt see continued strength in the Yen as others look for safe havens in the Asia Pac regions.