The Fed’s hawkish statement that sent USD and US stocks higher late yesterday has continued to have a big impact on trading Thursday. The hawkish hold took many in the market by surprise, but for me, the decision came out pretty much in line with the key points I had called for in my Fed preview above: Clarify hawkish hold check Drop overseas risk concerns check Signal potential December hike check Stocks and USD would see hawkishness as a positive check US budget crisis would force Fed to hold now but should blow over by Dec check More hawkish dissenters nobody’s perfect With the US Congress on its way toward resolving the current debt limit and budget crisis after the deal passed the more contentious House last night, the path appears to be clear for the Fed to put through one rate increase right at the end of the year, following the 2013 pattern where a budget crisis and government shutdown forced the Fed to delay tapering from September to December. At this point, it would probably take a major dropoff in data to knock the Fed off course. Today’s Q3 GDP report was slightly below expectations but offset by stronger claims numbers so no change in expectations from today’s news. For today’s Asia Pacific session, the focus shifts back from the US closer to home. The main event is the Bank of Japan meeting which appears to be a coin toss between more stimulus or not. Japanese economic numbers have been soft lately but there is a ton of Japan data out today that could potentially swing the decision. On the other hand, Bank of Japan governor Kuroda has appeared reluctant to increase QQE in recent comments. He may prefer to have some of the heavy lifting come from PM Abe’s fiscal side too. Consensus appears to be expecting a 10% increase of QQE to ¥88T per month from ¥80T. At least one dissenter would be expected as one member has been calling for a 50% QQE cut to ¥40T for several months now. With the Fed leaning hawkish and the ECB leaning dovish the Bank of Japan decision may determine if the current central bank easing cycle is continuing or nearing an end. In recent weeks, Norway and Sweden have made dovish moves while New Zealand and Canada have paused rate cutting trends. A move to increase stimulus could drive down JPY and boost the Nikkei (particularly stocks of exporters) while a decision to remain on hold or lean hawkish could boost JPY and knock down export stocks and the overall market. For more insight into today’s Bank of Japan Decision, check out the link to the excellent preview by my colleague Ric Spooner in the links above. China markets may also be active today. CNH has also strengthened on reports that China is about to drop its one child policy and target a 6.5% growth rate for the next five years. The rebound also indicates that China fears continue to fade even though PBOC talk suggest the central bank has lots of room to cut rates further. It’s the last trading day of the month so we may also see some positioning ahead of this weekend’s China PMI reports. NZD may attract attention today as well between continued reaction to yesterday’s decision by the RBNZ to stop cutting interest rates and stop talking down the dollar, and today’s sentiment data. North American markets may also continue to attract attention from traders on Friday. In addition to more earnings reports, Canada monthly GDP could influence trading in the loonie (along with oil prices as usual) while US traders may focus on employment costs, core PCE inflation and the Chicago PMI report. The latter may be most important as it has been a harbinger of softer US data over the last two months. Corporate News Electronic Arts $0.65 vs street $0.45, raises full year guidance to $3.00 from $2.85, looking for a big launch for Star Wars: Battlefront in the coming quarter First Solar $3.38 vs street $1.50, raises full year guidance to $4.35-$4.50 from $3.30-$3.60 Starbucks $0.43 as expected, same store sales 8.0% vs street 6.0% Economic News Significant announcements released overnight include: US Q3 GDP 1.5% vs street 1.6% and previous Q 3.9% US Q3 personal consumption 3.2% vs street 3.3% US Q3 core PCE inflation 1.3% vs street 1.4% vs previous 1.9% US initial jobless claims 260K vs street 265K US continuing claims 2.154K vs street 2,160K US pending home sales (2.3%) vs street 1.0% US natural gas storage 63 BCF vs street 70 BCF Canada industrial prices (0.3%) vs street (0.1%) Canada raw material prices 3.0% vs street 1.1% vs previous (6.6%) Germany unemployment change (5K) vs street (4K) Germany unemployment rate 6.4% as expected Germany consumer prices street 0.2% UK Nationwide house prices 3.9% vs street 3.8% UK CBI distributor sales 19 vs street 35 vs previous 49 Upcoming significant economic announcements include: 10:30 am AEDT Japan unemployment rate street 3.4% 10:30 am AEDT Japan household spending street 1.2% 10:30 am AEDT Japan consumer prices previous 0.2% 10:30 am AEDT Japan core CPI street (0.2%) 2:00 pm AEDT Japan interest and QQE decision 8:00 pm PDT 4:00 pm AEDT Japan construction spending previous (15.6%) 4:00 pm AEDT Japan housing starts street 6.6% 11:00 am AEDT NZ business outlook previous (18.9) 11:00 am AEDT NZ activity outlook previous 16.7 11:30 am AEDT Australia producer prices previous 1.1% 7:00 am GMT Germany retail sales street 4.2% 8:00 am GMT Spain GDP street 3.4% 9:00 am GMT Italy unemployment rate street 11.9% 9:00 am GMT Norway unemployment rate street 2.9% 10:00 am GMT Eurozone unemployment rate street 11.0% 10:00 am GMT Eurozone consumer prices street 0.0% 8:30 am EDT Canada monthly GDP street 0.1% 8:30 am EDT US employment cost index street 0.6% 8:30 am EDT US core PCE inflation previous 1.3% 8:30 am EDT US personal income street 0.2% 8:30 am EDT US personal spending street 0.2% 9:45 am EDT US Chicago PMI street 49.0 vs previous 48.7 10:00 am EDT US consumer sentiment street 92.5 vs previous 87.2 12:00 pm AEDT Sun China manufacturing PMI street 50.0 vs previous 49.8 6:00 pm PDT Sat CMC Markets is an execution only service provider. 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