The Federal Reserve’s March meeting decision is expected to significantly impact markets, and all eyes will be on it in the coming hours. Depending on any surprises the decision holds, the market may react in various ways.

No rate cuts yet

According to a Bloomberg survey, none of the 109 economists surveyed expect a rate cut in today’s Federal Reserve meeting. In the previous meeting, most Fed members anticipated three rate cuts this year, so the focus will be on any Fed’s economic projections and dot plot changes.

What matters the most today

The general consensus is that the Fed will maintain its current policy. However, the pace of the balance sheet unwinding is likely to be the most significant factor, outweighing economic projections.

Participants might discuss preliminary staff proposals, with a formal announcement slated for May or June and tapering to begin in July.

In addition, any guidance by Fed Chair Jerome Powell may provide on the timing of the upcoming rate cuts and would be another factor to keep an eye on.

DXY weekly close remains the key

The US Dollar Index broke multiple key resistance levels this week, including 103.65 and 104.0. The next key resistance is at 104.60.

Determining our bearish bias depends on the weekly close. If the weekly close is above the current levels, it could signal the end of the downside trend and the beginning of a new trend. However, this would need further confirmation over time.

USDJPY near 2007 highs

USDJPY reached its highest level since 2007, hitting 151.63 following the BoJ’s dovish hike decision yesterday.

Technical indicators are nearing an overbought condition. However, it is expected that the Bank of Japan (BoJ) will intervene soon, either in the coming days or weeks ahead. The intervention may begin with verbal warnings, as the BoJ has done in the past, in an effort to prevent further declines.

UK’s inflation slowed in February

The data on UK inflation for February revealed a significant deceleration. The CPI dropped from 4.0% to 3.4%, surpassing the estimated decline of 3.5%. Meanwhile, the Core CPI slowed down from 5.1% to 4.5%, though estimates had predicted a decrease towards 4.6%.

GBPUSD has fallen below 1.27 as market expectations suggest the first rate cut by either June or August. On the daily chart, the pair has been declining since its peak on March 8th, with the next support area around 1.2680 and 1.2630, where buyers are likely to appear. However, it is difficult to predict the current downside retracement ahead of the Fed’s decision.

 

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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