The U.S. dollar is mixed against major pairs ahead of the March Federal Open Market Committee (FOMC) meeting. The Fed is expected to deliver its fist interest rate lift under Chair Jerome Powell. The Fed will publish its rate statement on Wednesday, March 21 at 2:00 p.m. Eastern. Strong data has fuelled the dollar revival but the drama in the White House and tariff uncertainty are keeping the currency down against safe haven currencies.
Equity markets are coming out of a mixed session sandwiched in between critical economic indicators; while the E-mini S&P 500 was unchanged yesterday, the Nasdaq gained 0.5% and the Dow lost 0.5%. Gold surprisingly lost ground overnight, yesterday’s session should have been constructive enough to keep the sellers at bay through CPI data at 7:30 a.m. Central.
A reconstituted Federal Reserve under new leadership will face tough challenges in the year ahead. Monetary normalization is well underway, with the Federal Open Market Committee (FOMC) having raised the Federal funds rate five times since it left the zero lower bound two years ago and started shrinking the bloated balance sheet built up through three rounds of bond buying.
It is new Federal Reserve Chair Jerome Powell’s first real opportunity to steer the ship in the semi-annual congressional testimony. He first addresses the Senate Banking Committee on Tuesday at 9:00 am Central and then the House Financial Services Committee on Thursday at the same time. Speculation on the path of interest rates hikes have led to fickle market conditions.
The U.S. dollar appreciated during the week against major pairs. The currency got a boost from the release of the minutes from the January Federal Open Market Committee meeting. The brief statement was slightly hawkish, but the full notes from the meeting revealed the U.S. central bank upgraded its economic projections from those made in December and expects the 2% inflation target to be met in the mid-term.
Volatility soared in equity and fixed income markets in the final hours of yesterday’s U.S. trading session. After dropping to 17, the Cboe Volatility Index gained 19%, ending the day above 20. The S&P 500 reversed a gain of 1% to end the day 0.55% lower. Similarly, the Dow Jones gave up 470 points from peak-to-trough, while U.S. Treasury yields spiked across the curve, and 10-year yields breached 2.95% for the first time in four years.
The most important event this week is the release of the Minutes from January’s European Central Bank meeting on Thursday. Remember, it was the release of the December minutes on Jan. 11 that sent the euro on a two-day run of 1.8%...