Not a lot to shout about from Friday, but USD managed to finish higher for the first time in three weeks going into this week's Fed (Federal Reserve) meeting, with US treasury yields rising the most since October as markets surrender to higher for longer rates reality.
*Daily move - against G10 rates at 7:30am, 18.03.24
** Indicative rates - interbank rates at 7:30am, 18.03.24
Focus on Central Bank meetings this week with the BoJ (Bank of Japan), BoE (Bank of England), and Fed all in focus. The BoJ is widely expected to be live, with the potential for the Bank to lift interest rates out of negative territory. Recent US data will most likely lead to the Fed repeating the notion that they aren't quite ready to cut interest rates, with June still priced as the most likely month. The Dot Plot will be key to gauge how the Fed currently see the economy, and any hawkish hints will likely lead to further USD gains particularly after the latest set of hot data from the US.
The BoE will likely continue their narrative that rates needs to be restrictive for an extended period, backing calls for the first rate cut to be in August. The votes in the meeting will be important to gauge which way members are leaning to. In the last meeting we still had two hawks opting for a hike, and one member opting for a cut and the rest are neutral. The day before we have UK inflation numbers. This could actually be more volatile than the BoE meeting itself, with the services CPI number being the key metric.
We also have preliminary PMI numbers for March on Thursday from the UK, EU, and US, and on Friday UK retail sales. Today just sees the release of final CPI numbers from the eurozone.
The last two months of inflation data from the US is starting to imply that the Fed’s job isn’t quite done yet, and this has been reflected in the money markets, with the amount of rate cuts expected this year reducing 95bps at the start of the week to 75bps (Fed’s current projections). USD has gained as a result this week, and should next week's dot plot show any hesitancy in the amount of rate cuts, i.e. is perceived hawkish, then more gains on the greenback could be seen.
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