The Fed’s policy board have been locked into a public debate over the correct timing of raising interest rates, which have been near zero since December 2008. In April, the Fed removed all calendar references in its forward guidance, meaning the bank is now entirely data-dependent.
Various FOMC members have turned increasingly hawkish over the past few months, with Fed chairwoman Janet Yellen expressing a desire to raise rates sometime this year.
But inflation remains below the bank’s target of two percent – the CPI has been no higher than 0.4 percent for the past two years and dipped to -0.6 percent at the start of 2015.
US data releases today include the PPI, the core PPI, preliminary UoM consumer sentiment and inflation expectations as well as Federal budget balance.
China is also proving influential this morning – its central bank has intervened in the offshore yuan after the spread between its onshore and offshore currencies widened to create arbitrage opportunities.
“In an effort to dampen speculation and stabilise local financial markets, the PBoC reportedly intervened aggressively in CNH sending a very clear message that the spread between CNH and CNY was too high,” ANZ Research said.
The PBoC has lowered the proportion of deposits that financial institutions need to set aside as reserves to enhance liquidity, the central bank said in a statement.
Earlier, Chinese M2 money supply came in as expected at 13.3 percent, while new loans disappointed at 810 billion yuan. Over the weekend, industrial production, fixed asset investment and retail sales are scheduled for release and might give more clues on the state of the Chinese economy.
In equities, the Shanghai Composite Index was last up 0.07 percent at 3,200.234.
“At the end of what was a particularly volatile week, equity returns are mixed in Asia as traders adjust their positions ahead of next week’s FOMC meeting,” Swissquote said in a note.
In the metals, copper at $5,349 was down $49 on Thursday’s close. Inventories continued to decline, falling a net 2,300 tonnes to 342,000 tonnes. Cancelled warrants were 725 tonnes lower at 63,050 tonnes.
Aluminium slipped $5 to $1,632 although stocks continued to fall, dropping 10,275 tonnes to 3,186,275 tonnes, the lowest since 2009. Cancelled warrants dropped 10,275 tonnes to 1,175,025 tonnes.
Nickel, which was Thursday’s strongest performer, fell $155 to $10,295. Stocks fell 1,710 tonnes to 447,972 tonnes taking on warrant availability to 281,952 tonnes – the lowest since October last year.
“The supply deficit that some market participants had expected already to materialize this year should finally come about next year, production cuts in particular contributing to this alongside solid demand,” Commerzbank said in a note.
“Norilsk Nickel, the world’s largest nickel producer, estimates that more than 60 percent of producers worldwide will be operating at a loss at prices of $10,000,” it added.
Zinc at $1,809 was $5 lower – stocks and cancelled warrants both fell 3,150 tonnes to 571,975 tonnes and 59,000 tonnes respectively – and lead also slipped $1,725, with stocks edging 150 tonnes lower to 168,600 tonnes.
Tin at $15,260 was down $115. Stocks dropped 85 tonnes to 5,540 tonnes while cancelled warrants fell 315 tonnes to 1,460 tonnes. Steel, cobalt and molybdenum were neglected.