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Markets Trade Soft Ahead of FOMC Rate Decision

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USD

On Tuesday, the dollar index gained some strength after disappointing inflation numbers from United Kingdom and Zew Economic Sentiment from Germany. The dollar index traded at a high of 90.40. For today, Fed Funds Futures market is pricing in a 99.3% chance, a rate hike, from 1.50% to 1.75%. This meeting will be the first meeting where Jerome Powell is the chairman and it will be followed by a press conference, where he will be able to clarify about the Fed’s economic projections. Traders should look carefully for the dot plot as everyone is curious to know whether the Fed is going to move two or more times this year. Fed Funds Futures are pricing a 32% chance of more than 2 hikes and 68% chance of less than 2 hikes this year.

EUR

The EURO traded at lows of 1.2240 yesterday after Economic Sentiment from Germany and Eurozone dropped. EUR/USD has been trading in a range of 400 pips for the past two months and awaiting major fundamental developments in order to break-out.

GBP

The Sterling pound erased some of Monday’s gains after lower than expected inflation numbers were released. Pound was able to find support around the 1.3990 level, since the CPI numbers YoY are still in the 2-3% price target of the BOE and also the positive progress of the Brexit deal between United Kingdom and the Eurozone. For today, we have the employment report coming out where the unemployment rate is expected to stay at 4.4%, claimant count to rise 4.1K to -3.1K from -7.2K, and the most important number of today's report is the average earnings index which is expected to rise to 2.6% from 2.5%.

Gold

Gold has been trading in a tight $10-12 range for the past three days. The volatility that is expected from the FED might support gold to break out from the consolidation phase. Major support and psychological level is $1300.

Oil

Early on Wednesday, Oil prices settled higher, backed by tensions in the Middle East and healthy global demand, but gains capped by the relentless rise in U.S. production that is undermining efforts led by OPEC. Crude Oil WTI Futures - Crude Oil WTI Futures - Apr 18 (CLJ8) rose as much as 0.20%, to settle at $63.67, and Brent Oil Futures - May 18 (LCOK8) was up by 0.19% at $67.55.

The most important economic events:

  • USD FOMC Rate Decision (Upper Bound) (MAR 21): (GMT 18:00) – Important – Forecast (1.75%) – Previous (1.50%).
  • USD FOMC Rate Decision (Lower Bound) (MAR 21): (GMT 18:00) – Important – Forecast (1.50%) – Previous (1.25%).
  • USD Fed Chair Jerome Powell News Conference: (GMT 18:30) – Important –
  • NZD RBNZ Official Cash Rate (MAR 22): (GMT 20:00) – Important – Forecast (1.75%) – Previous (1.75%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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