RBC Capital Markets

Overnight, USD has stabilised, consolidating the small losses (0.3% in DXY terms) that came in the immediate wake of the FOMC announcement. Similarly, US 10yr yields have settled around 4bp lower. The FOMC statement was almost entirely unchanged from the previous version and the reaction largely reflects some disappointment that Powell did not drop stronger hints on the start of tapering in the press conference. When asked, he simply said “it's not time yet.”

From here on, we go back to watching data for clues on when this might change. USD’s soft tone is also helped a rally in tech stocks (NASDAQ future +1.0%) after strong results from Apple and Facebook. Subsequent to the Fed, overnight news flow has been limited.

Day ahead: The first estimate of US Q1 GDP is the highlight of the day’s releases (see USD below). German April CPI data may shift expectations for tomorrow’s Eurozone release (see EUR). Otherwise, the calendar is packed with a steady stream of relatively minor releases (see table below). All of China’s April PMI releases are out overnight (official and Caixin, manufacturing and non‐manufacturing). US Q1 earnings announcements are due from Amazon and Twitter


No surprises from the Fed or President Biden overnight have seen markets take this as a green light for further gains. Positive tech earnings overnight too have supported equity indices comparatively more than risky FX, but nonetheless, we see a number of pairs testing/eyeing key levels including GBP, AUD and EUR. Ahead, further USD weakness is expedted by CitiFX Strategy, with the narrative turning back towards reflation trades and stability in rates space for now.

Data today should not derail the narrative either, with USD jobless claims, Q1 GDP and core PCE likely to be overlooked given the Fed still sees “some time” before “substantial further progress”.

EUR looks to Germany CPI and unemployment, as well as Eurozone economic confidence data. These prints could be interesting at the margin, but again unlikely to materially move the market. Lastly, EM sees a TRY inflation report as the only point of note.

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