Forex
The value of the greenback has increased. The early part of the year was anticipated to see a
decline in the dollar's value as G-10 central banks tightened monetary policy and the Fed
slowed the rate of rate hikes.
Fed raised interest rates by 0.25% on March 22, signaling the end of rate hikes and voicing
caution regarding the recent banking crisis.
The Federal Open Market Committee expects that further increases are not guaranteed and will
largely rely on incoming data along with its ninth increase since March 2022.
The Bank Rate increased to 4.25% in March after a 25bps rate increase by the BoE. The voting
results revealed that the MPC's rate decision was still divided 7-2 from its February meeting,
with two members voting for no change.
The Deposit rate increased to 3% in March after the ECB boosted rates by 50 bps. The ECB
had made it plain that 50 basis points could increase rates at the meeting. At its meeting in
March, it did not offer any additional rate forecasts.
In March 2023, the EURUSD exchange rate experienced substantial swings, falling to its lowest
since 2008. However, the figures changed, with a rate of 1.08 USD being recorded during this
month.
Meantime, USDJPY hit below 130 following the bearish sentiment on the US dollar fueled by
Fed’s interest rate hike decision.
After the UK government unveiled its early plans to fight inflation, the GBP/USD exchange rate
fell to its lowest level ever. After these plans were abruptly abandoned, prices did go up again.
One pound was worth approximately 1.23 U.S. dollars as of March 28, 2023.
Commodities
Oil prices remained bearish throughout the third week of March as risky assets were sold off on
international markets in response to concerns about the sustainability of the US and European
financial systems following the failure of two local American banks.
Crude oil futures dropped by about $1/bbl month-over-month in February as the hawkish shift in
central bank policy outweighed the optimism encircling China's reopening. Despite continuing
US crude stock builds, WTI physical differentials have continued to decline. In March, prices
dropped $3/bbl further. Russia's supply had declined by 0.7m b/d in March. R
Despite the March declines, recent Russian oil exports have exceeded demands, and we have
updated our 2023 oil output forecast for Russia to include an increase of 0.4 million b/d. Global
oil and liquid fuel output are anticipated to increase by 1.6m b/d to an average of 101.5m b/d in
2023.
The price of gold is $1,965 per ounce. It crossed the $2,000 mark on March 20. Since SVB
experienced a bank run in early March, the gold price has increased by about 10%.
Indices
Stocks surged higher this afternoon after several days of erratic price movement, with the S&P
500 continuing to bounce at its crucial battlefield level of 3,930, which is the 200-day moving
average's (MA) technical support.
While market implied probabilities are decreasing, with implied peak rates below 5% and implied
year-end rates below 4%, Fed President Bullard said today that he is raising his terminal rate
forecasts by 25 basis points to 5.625%. a notable discrepancy between what the Fed is
communicating and what bonds and stocks are currently trading for.
The FTSE index is now testing the 200-day SMA as resistance following a significant intraday
reversal. The recent decline provides FTSE bears with more desirable levels to evaluate setups
for a bearish continuation. The critical 7170 and 7295 levels, which served as a pivot point to
the index several times last year, are levels of interest to consider further selling.
Market Events
As policymakers re-examined the case for a rate halt at the subsequent meeting, the Reserve
Bank of Australia's (RBA) recent minutes showed a step-down from prior hawkishness on March
29.
China’s March non-manufacturing and NBS manufacturing PMI will be released on March 31.
Services operations also reflect the strength, with an all-time high reading (56.3) in the past two
years. The post-Covid recovery will continue to be closely watched. Given the possibility of
further challenges to external demand conditions, the services sector will need to step up and
carry the bulk of the load.
Eurozone’s flash inflation rate will also be published on March 31. Expectations are growing that
the ECB, despite core inflation showing no indications of peaking as of March 2023, will follow
the Fed's lead and move toward a potential rate pause after the Fed signaled a near-end to its
rate hike cycle.