- The Federal Reserve Chairman advises journalists that interest rate cuts are not likely in March. However, bond yields continue to decline indicating institutions continue to believe cuts are impending.
- The USA100 declines by 2.5% over two consecutive days after earnings data was unable to support individual stocks.
- Futures market points lower in Europe and Asian stocks show no clear direction. Traders are considering if investors will take advantage of the lower price ahead of tonight’s vital earnings data.
- Stock traders turn their attention to earnings from Apple, Amazon and Meta. The three stocks make up almost 18% of the NASDAQ.
EURUSD – The US Dollar Rises Against All Currencies!
The EURUSD exchange saw one of the highest levels of volatility amongst the “major currency pair” category. The exchange rate saw two significant impulse waves which can be explained using fundamental factors. The first impulse wave was in favor of the Euro and was largely due to the German inflation data reading higher than expectations. The correction which followed in the US session was due to the Fed’s comments on future interest rates.
This morning the exchange rate trades 0.30% lower and continues to obtain sell signals against the Dollar. The US Dollar Index is trading at its highest level since early December 2023. The Euro on the other hand is not witnessing any significant price movements against other major competitors. The Euro upward price movement was generally weak against the Dollar as German inflation still fell despite the smaller decline and also French inflation fell by a considerable -0.2%.
The US Dollar saw some negative economic data for the first time in over two weeks in yesterday’s session. The ADP Non-Farm Employment Change read 41,000 lower than expectations and the Employment Cost Index for the quarter fell to its lowest level since July 2021. Nonetheless, the Federal Reserve confirmed in their press conference that a rate cut in March is not likely. According to analysts, the Fed will not likely cut at the March meeting unless employment data takes a serious hit. According to the CM Exchange, there is a 92% chance of a rate cut in May and a certain cut by June at the latest. The Fed did not give any indications that this is not possible and is being backed this morning by declining yields. The question is who will opt for larger and more frequent cuts, the Fed, the ECB or the Bank of England.
USA100 – Will Investors Continue Profit Taking?
The USA100 saw a considerable downward price movement on Wednesday and order flow analysis indicates seller overpowering buy orders. In addition to this, the assets traded below the volume weighted average price throughout the whole day. Technical analysis and order flow indicate a decline in the asset; however, traders also need to consider if investors will look to re-enter at a lower price.
This will largely depend on tonight’s earnings data. Analysts expect Apple, Amazon, and Meta to witness significantly higher earnings as well as revenue. However, the question is whether the companies will beat expectations. Investors will also be closely monitoring reviews on the new Apple headset. These reviews and future sales figures can significantly affect Apple stocks which hold 8.78% of the NASDAQ. So far, reviews are positive in terms of the technology and experience, but negative in terms of the price and demand due to the high cost.
GBPJPY – Investors Turn Their Attention to Bank of England Votes
The GBPJPY is decreasing in value for its fourth consecutive day and is trading at its lowest level since January 16th. Throughout the year the Japanese Yen is expected to perform well due to being the only Central Bank which will not be cutting interest rates. However, in the short-term, the price action will depend on this afternoon’s Bank of England Press conference and “Committee Votes”.
The rate decision is without a doubt not going to change this month, however, the change in votes can create volatility. Analysts expect 2 members of the committee to vote for another interest rate increase, which is lower than last month’s 3 votes. If the votes are more hawkish than expectations, the Pound can rise. Whereas less votes for rate increases or a vote for a decrease would significantly pressure the Pound.
Technical analysis signals a downward trend when evaluating momentum and trend-based indications. However, the price has fallen to the previous resistance level which can be flipped to a support.
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
Breaking News: Fed Declares No Rate Cut in March – Dollar Skyrockets!
The financial world was abuzz with excitement and anticipation as the Federal Reserve recently announced its decision on interest rates for the month of March. And the verdict is in – the Fed has declared that there will be no rate cut this month, causing a major stir in the forex market.
This news came as a surprise to many investors and traders who were expecting a rate cut following the economic uncertainties caused by the COVID-19 pandemic. In this article, we’ll delve into the details of this decision, its impact on the dollar and other major currencies, and what it means for the future of the global economy.
Why Did the Fed Choose to Keep Rates Unchanged?
The Federal Reserve’s decision to keep interest rates unchanged was primarily influenced by the recent surge in inflation levels. According to the Consumer Price Index released by the Department of Labor, the prices of food, energy, and other commodities have been on the rise, causing a 0.4% increase in overall inflation in February. This is the biggest jump in inflation since August 2018 and has prompted the Fed to adopt a more hawkish stance.
In addition, strong retail sales and employment numbers have also contributed to the Fed’s decision to maintain rates. The US economy added 379,000 jobs in February, far exceeding the initial forecast of 182,000, and the unemployment rate has dropped to 6.2%. With the economy showing signs of recovery, a rate cut was deemed unnecessary at this time.
Dollar Soars as the Fed Holds Steady
The Fed’s announcement has had a significant impact on the US dollar, causing it to rally against other major currencies. The Dollar Index, which measures the strength of the dollar against a basket of other currencies, jumped to a three-month high of 92.63 following the news.
This surge in the dollar can be attributed to the fact that a rate cut would have weakened the currency, making it less attractive to foreign investors. With the Fed choosing to maintain rates and possibly even hike them in the future, the dollar has become a more desirable asset for traders and investors.
Impact on Other Major Currencies and Markets
While the dollar saw a strong uptick, other major currencies and markets experienced a downturn in response to the Fed’s decision. The euro, British pound, and Japanese yen all fell against the dollar, with the euro dropping to a four-month low.
The stock markets also took a hit, with the Dow Jones Industrial Average shedding almost 1%. This can be attributed to the stronger dollar, making US exports more expensive and less competitive. In addition, fears of rising interest rates in the future may also have contributed to the stock market’s dip.
What Does This Mean for the Global Economy?
The Fed’s decision to keep rates unchanged has undoubtedly sent a strong signal to the global economy. With the US being the world’s largest economy, its monetary policy has a significant impact on other countries and their currencies. A stronger dollar could mean weaker currencies for other nations, making it more expensive for them to import goods from America.
In addition, the Fed’s hawkish stance and projection of two potential rate hikes in 2023 could affect countries with high levels of debt, as they would have to pay higher interest rates on their borrowings. This could also lead to a slowdown in global economic growth, especially in developing countries.
Practical Tips for Investors and Traders
Given the current state of the market, investors and traders may need to adjust their strategies to navigate the impact of the Fed’s decision. Some practical tips to consider include:
1. Keep an eye on inflation levels: With inflation currently on the rise, it’s essential to monitor its trajectory to anticipate any potential market changes.
2. Diversify your portfolio: With the dollar gaining strength, it may be wise to spread investments across various currencies to reduce risk.
3. Pay attention to macroeconomic indicators: Economic reports, such as employment data, retail sales, and manufacturing numbers, can give valuable insights into the health of the economy and inform investment decisions.
The Federal Reserve’s recent decision to hold interest rates steady has caused ripples in the financial world, with the dollar skyrocketing and other major currencies and markets experiencing dips. While this decision may have come as a surprise to some, it reflects the Fed’s confidence in the US economy’s recovery and serves as a signal to the global economy.
As an investor or trader, it’s crucial to stay informed and adapt to changes in the market. The aftermath of the Fed’s decision may present new opportunities for those who are attentive and agile in their decision-making. As always, diversification and staying up-to-date with economic indicators are key to navigating the ever-changing financial landscape.