Central Banks

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The Reserve Bank of Australia (RBA) as expected kept interest rates on hold at the historic low of 1.5 per cent for the 21st consecutive meeting. Household consumption remains a source of uncertainty. Wage growth remains low, likely to continue for a while.

The Federal Reserve completed its annual stress test and concluded Deutsche Bank for the third time in four years  The Fed also limited the payouts of Goldman Sachs and Morgan Stanley. State Street will have to give the Fed more information on counterparty exposure.

The Bank of England voted 6 to 3 to maintain Base Rate at 0.50% with Haldane joining McCafferty and Saunders to dissent. The asset purchase target of £435 billion for corporate and UK government bond purchases was voted unaminous..

ECB interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged. THe ECB gave an end date for QE but Interest rates to stay on hold until summer of 2019.

The Federal Reserve hiked interest rates a quarter percent as expected after a two day meeting on Wednesday for the third time with Jerome Powell as Chairman. Markets had priced in a 90% chance of 25 bp hike.

The Reserve Bank of Australia (RBA)as expected has kept interest rates on hold at the historic low of 1.5 per cent for the 20th consecutive meeting Household income has been growing slowly and debt levels are high.

The Federal Reserve may keep hiking rates San Franciso Fed President John Williams told Reuters after the strong jobs report Friday He said the Fed may lift interest rates beyond 'neutral' level. 

The U.S. dollar and US Treasury yields continued their upward trajectory yesterday. Ten-year yields moved above 3.11% with $EURUSD under 118 and $USDJPY over 110.50. With sizeable positioning now on any comments on monetary policy from the Fed will be played off.

The Australian Yield Discount to the U.S. is at it's widest since 1981, continuing to shrink following recent RBA and Fed meetings confirmed diverging policies. The swap market is betting the Aussie-U.S. differential will triple in 2 years. Forward points are a key $AUDUSD component. 

The Federal Reserve on Wednesday with Chair Jerome Powell announced no charge in rates. Markets had priced in negligible odds of a rate hike. With no press conference, the next hike is expected in June.

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