Asian markets rebounded on reports that China has broadened stimulus and the news also took Australian dollar higher. It's reported that the PBoC is injecting CNY 500b, or USD 81b into the five major state-owned banks. The intention is to boost liquidity to channel through to public housing and private businesses. The massive size of injection is seen as equivalent to 50 bps cuts in the so called reserve ration requirements for the whole banking system. Such expansion of monetary base was also seen as "printing money" and a form of quantitative easing. Economists noted that such a move was the first time in response to recent weak economic data and there could be additional steps ahead including fiscal spending.
Looking ahead, a number of important events are scheduled today. BoE minutes will be a major focus. The central bank held policy unchanged in September meeting, with key rate at 0.50% and asset purchase size at GBP 375b. An important point to note is the vote on rates. In August, two policy makers Weale and McCafferty voted for a rate hike of 25bps. And markets will see if any more members joined this hawk camp. The majority of analysts are expecting BoE to keep rates unchanged into 2015 but this is far from being certain. Also to be released from UK, jobless claim is expected to drop -29.7k in August while unemployment rate would drop to 6.3% in July. Nonetheless, any move in Sterling today could be brief as traders would stay cautious ahead of the Scottish independence referendum. Also to be released from Europe include Swiss ZEW and Eurozone CPI final.
FOMC rate decision is another major focus of the day. The Fed is expected to reduce a further USD 10b in the QE program, leaving a final USD 15b which will be removed at the October meeting. We expect to see the statement modified to signal clearly that the QE would end in October. The biggest question is whether FOMC would change the language in the accompanying statement to reflect that rate hike is nearing. To be specific, Fed noted that rates would stay near zero for a "considerable time" after QE ends. And markets are wondering if Fed would drop "considerable time" and vote pattern for such change or not. Fed will also release updated economic projections. There could be upward revision in GDP forecast and downward revision in unemployment rate. Also to be released include US CPI, current account and NAHB housing market index.