The Fed’s latest decision left a significant mark on the markets, causing a surge in stock prices and substantial movement in both currency and commodity markets.
Initially, the dollar showed strength, but it eventually faltered following Powell’s comments. Meanwhile, Bitcoin soared above $86,800, and gold reached another record high as traders evaluated the shifting economic landscape.
Let’s dive into some major influences and movements from recent trading sessions.
Headlines:
- The Bank of Japan (BOJ) kept interest rates constant as anticipated, with members planning to reassess the "uncertain U.S. and global outlook" come April.
- Japan’s Reuters Tankan sentiment index dipped from +3 to -1 in March due to apprehensions over U.S. tariff policies and China’s economic frailties.
- The Turkish lira hit new lows after the Istanbul mayor and Erdogan’s political adversary was incarcerated.
- January’s final Consumer Price Index (CPI) for the Euro Area marked a 0.4% month-over-month increase (against an expectation of 0.5%, with a previous value of -0.3%), and a 2.3% year-over-year rise (versus a 2.4% forecast, with a previous value of 2.5%). Core CPI stood at 2.6% year-over-year, aligning with forecasts but down from a previous 2.7%.
- U.S. EIA crude oil inventories climbed by 1.7 million barrels for the week ending March 14, exceeding the expected 0.8 million barrels and the prior 1.4 million.
- A phone conversation between Ukrainian President Zelenskiy and U.S. President Trump resulted in a halt on strikes against Russian energy targets.
- The Fed maintained current rates, slowed its Treasury holdings runoff, increased inflation forecasts, lowered growth projections, and anticipates two rate cuts in 2025.
- New Zealand managed to exit recession with a Q4 2024 GDP growth of 0.7% quarter-over-quarter, topping the forecasted 0.4% and improving from a previous decline of 1.1%.
Broad Market Price Action:
The recent Fed meeting stirred up the markets, leading to major shifts in key assets. U.S. stocks climbed as the Fed confirmed its forecast for two rate cuts in 2025 while raising inflation estimates and lowering growth forecasts.
The S&P 500 rose by 1.08%, the Nasdaq saw a 1.41% increase, and the Dow advanced by 0.92%, led primarily by consumer discretionary stocks. On the other hand, European markets were mixed; France’s CAC 40 notched a 0.7% gain, while Germany’s DAX fell by 0.4% as investors juggled trade worries with economic uncertainty, compounded by Fitch’s lowered global growth forecast.
Bitcoin’s upward trajectory continued, adding $2,600 to surpass $86,800. This was supported by positive sentiment about the Fed’s decision to retain more Treasuries in its holdings, thus increasing system liquidity.
Gold has been on a winning streak, hitting a new high at $3,052 as geopolitical tensions drew in safe-haven buying. Despite increasing inventories, oil prices inched higher with WTI crude ending just below $67.00. Initially, Treasury yields increased post-Fed announcement, but the 10-year yield ultimately fell by 2.5 basis points to 4.25%, as markets embraced the Fed’s steady rate cut outlook.
FX Market Behavior: U.S. Dollar vs. Majors:
The U.S. dollar kicked off strongly on Wednesday following the BOJ’s decision to keep rates fixed. It briefly rose to 150.00 against the yen amid Governor Ueda’s press conference, but pulled back when he acknowledged trade uncertainties.
In the European trading session, despite weaker Eurozone inflation data, the dollar pushed higher. The EUR/USD fell to 1.0859 as the euro faced pressure from sluggish European equity markets and increasing trade tension worries. Safe-haven flows into the dollar also intensified after the Turkish lira’s plunge.
The Fed’s policy statement marked a pivotal moment. While sticking to a projection of two rate cuts in 2025, the Fed raised inflation expectations and lowered growth forecasts. During Powell’s press conference, the euro bounced back to 1.0900 after he remarked it was “too early” to gauge tariffs’ effects on inflation.
By session’s end, the dollar had relinquished most of its gains, with USD/JPY ending near 149.00 after briefly touching 150.13. A stronger-than-expected GDP report from New Zealand applied further pressure, leaving the dollar mixed but generally weaker against major currencies.
Upcoming Potential Catalysts on the Economic Calendar:
- Switzerland trade balance at 7:00 am GMT.
- Germany Producer Price Index (PPI) at 7:00 am GMT.
- U.K. labor market data at 7:00 am GMT.
- ECB President Lagarde to speak at 8:00 am GMT.
- SNB monetary policy decision at 8:30 am GMT.
- SNB press conference at 9:00 am GMT.
- ECB economic bulletin at 9:00 am GMT.
- U.K. CBI industrial order expectations at 11:00 am GMT.
- BOE monetary policy decision at 12:00 pm GMT.
- Canada IPPI and RMPI at 12:30 pm GMT.
- BOE Governor Bailey to give a speech at 12:30 pm GMT.
- U.S. initial jobless claims at 12:30 pm GMT.
- U.S. Philadelphia Fed manufacturing index at 12:30 pm GMT.
- U.S. current account at 12:30 pm GMT.
- U.S. existing home sales at 2:00 pm GMT.
- U.S. CB leading index at 2:00 pm GMT.
- BOC Governor Macklem to speak at 4:45 pm GMT.
- New Zealand trade balance at 9:45 pm GMT.
- Japan national core CPI at 11:30 pm GMT.
The European session could see significant moves for the Swiss franc with the SNB decision, and for the British pound with the Bank of England’s policy update and Governor Bailey’s speech.
During the U.S. session, the dollar might react to data on jobless claims, manufacturing, and housing, while Canadian dollar traders will be watching for policy signals from BOC’s Macklem.
Stay alert for comments from central bankers or geopolitical developments that could influence major currency price movements. Plus, don’t miss out on our new Forex Correlation Calculator when planning your trades!
