FOMC Minutes: Downside Risks Lead to Dovish Consensus

Daily Analysis - 07/04/2016

FOMC Members Agreed to Remain Dovish

Minutes from the Federal Reserve's meeting from March released yesterday showed that while some Fed members argued for a rate hike in April, a consensus emerged that the global economic and financial situation posed considerable downside risks. Fed members were concerned that inflation would continue to run below the Fed’s 2.0% inflation rate.

German Industrial Production Contracted in February

Hot on the heels of a 1.20% decline in manufacturing production, yesterday's industrial production data released by the German economy ministry showed a 0.50% contraction. This follows a revised 2.30% expansion in January which was originally estimated at 3.30%. Manufacturing output remained weak offsetting the gains in the construction sector in Europe's largest and strongest economy. The ministry noted that Germany's industrial companies had a fairly positive start to the year and that solid gains are to be expected in both the manufacturing and industrial sectors in the first quarter, raising expectations that March's numbers could see an upturn. On a twelve month basis the latest industrial production numbers fared better, rising 1.30% from the figures of February 2015.

Canada's Ivey PMI Falls to 50.1 in March

Canada's purchasing manager's index fell to 50.1, missing forecasts of 54.9 and down from February's 53.4 on a seasonally adjusted basis, showing a sharp contraction from a month ago. The Ivey PMI which measures the changes in economic activity across Canada showed that the inventories index was lower at 48.6 compared to a month ago while the prices index was at 58.5, indicating that prices were higher compared to a month ago. The dip in the Ivey PMI in March marks a second consecutive month of declines following January's PMI 66.0.

US Crude Oil Inventories Fall Sharply

The weekly crude oil inventories report from the US Department of Energy released yesterday showed a surprise drawdown, snapping a seven consecutive weekly increase. For the week ending April 1st, US commercial crude oil inventories fell by 4.93 million barrels after the previous week showed an increase of 2.3 million. Analysts were expecting to see an increase of 3.1. US gasoline inventories, which has been in strong demand in the previous weeks, saw a surplus of 1.438 million barrels, dashing expectations of a decline of 1.295 million. Following the release of the weekly inventory report, WTI crude oil posted a strong rally to close at $37.76 yesterday. Oil prices have remained volatile as prices started to decline steadily for two straight weeks following a strong rally to touch a 4-month high at $41.66 a barrel.

US Weekly Jobless Claims Expected to Rise

The weekly jobless claims for the week ending 1st April is expected to show an increase of 271K. The weekly claims started to rise more than expected after staying flat for the most part in March. Today's weekly jobless claims come on the back of the previous week's claims which showed an increase to 276K, more than the consensus forecast of 265K. Following the weekly jobless claims, Federal Reserve Chairwoman Janet Yellen will be speaking at an event which includes former Federal Reserve chairs, Ben Bernanke, Alan Greenspan and Paul Volcker. Not much is expected from this event in terms of providing insights into the Fed’s future course of action, but the discussion among the former and current chairpersons could reveal some interesting insights into the broader scope of monetary policy actions from the Federal Reserve.