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21/03/2024 - 08:12 UTCThe US Dollar retreated against most major currencies on Wednesday, with the dollar index (USDX) giving away most of the gains seen in the last few sessions, ending the day 0.41% lower. The move came following a decision by the Federal Reserve to keep interest rates unchanged while policymakers still projected three U.S. rate cuts this year despite sticky inflation. According to reports, the Fed's quarterly economic projections showed personal consumption expenditures price index rising at a 2.6% rate by year-end, compared to 2.4% in the projections the U.S. central bank issued in December.
Investors raised their bets from around 50% seen earlier this week to over 70% that the Fed will have enough reason to begin cutting rates by June, according to the CME Fedwatch tool. Nonetheless, markets remain cautious as to the rate cut outlook since that is largely dictated by economic releases and especially those related to inflation.
Sentiment in Wall Street remains strong as all three main indices surged once again on Wednesday, with the US 500, the US 30 and the US tech 100 marking new record highs and crossing levels $5,200, $40,000 and $18,500 respectively as the Fed held interest rates steady while signaling three rate cuts this year, easing fears that elevated inflation would force the central bank to remain hawkish.
In corporate news, Tesla gained by than 2% after the EV manufacturer confirmed it will raise the price of China-produced Model Y vehicles from April 1. In addition, a series of key players will be reporting their earnings today, among which are Accenture, Lufax, Nike, FedEx, Lululemon and Athletica
In today’s session, some price action could be observed upon the release of Flash manufacturing and employment data from the eurozone, the UK and the US, along with an interest rates statement from the BOE, US jobless claims and the Philly Fed manufacturing index.
The EUR/USD pair jumped on Wednesday ending the session 0.70% higher after reacting to the Federal Reserve’s (Fed) latest rate call, which held rates at 5.5% as markets had broadly predicted.
Investor expectations are pricing in additional easing in 2024, despite the Federal Open Market Committee seeing stronger growth through 2024 and 2025 than initially expected.
At his press conference, Chair Powell delivered a dovish tone after he praised the economy's progress, citing robust consumer demand and supply chain recovery. Fed Chair Powell noted that while inflation continues to ease, price growth remains a key issue the Fed can't dismiss, as a tight labour market and higher-than-expected growth continues to complicate the future of rate cuts.
Gold prices hit a record high on Wednesday, tracking a sharp drop in the dollar after the Federal Reserve kept interest rates steady and signalled that it was still considering rate cuts this year. Gold prices added 2.18% daily gains on the prospect of lower interest rates in the coming months.
Fed Chair Jerome Powell said that while he did see some recent stickiness in inflation, the underlying story of easing inflation remained intact. Traders were now pricing in a 73.4% chance that the Fed’s first rate cut will come as soon as June, according to the CME Fedwatch tool.
Oil prices fell on Wednesday as the U.S. Federal Reserve held interest rate steady and demand concerns continue to weigh.
On Wednesday, the Federal Reserve kept interest rates in the 5.25% to 5.50% range, but policymakers indicated they still expect to reduce them by three-quarters of a percentage point by the end of 2024.
Inventories of U.S. crude fell by 1.95M barrels for the week ended Mar. 8, compared with expectations for a draw of 0.9 million barrels, the Energy Information Administration reported Wednesday.
Wall Street's main stock indexes closed higher on Wednesday after the Federal Reserve eased investor worries by keeping borrowing costs unchanged and reinforcing expectations that rates could be cut as many as three times this year. At the close, US 500 added 1.22% while US 30 and US Tech 100 gained 1.21% and 1.70% respectively.
The Fed's policy statement raised economic projections for economic growth and lowered its projection for the unemployment rate from estimates it provided in December.
Focus now turns to upcoming purchasing managers index readings for March, which are expected to offer more cues on the U.S. economy.
Both manufacturing and services activity is expected to have remained comfortably in expansion so far in March.
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