Global FX Market Summary: USD, Fed, Gold March 14,2024

A strong dollar from high US inflation delays Fed rate cuts, potentially weakening the Euro and causing short-term volatility in markets and gold prices.

US Dollar Strength: The US Dollar strengthened this week after hotter-than-expected US inflation data (PPI). This data suggests the US economy remains strong, which could lead the Federal Reserve to delay cutting interest rates, potentially pushing back expectations for a rate cut until later in the year. A stronger Dollar is negative for the Euro (EUR) as it makes European exports more expensive, and positive for the US Dollar Index (DXY) which measures the value of the US Dollar against a basket of foreign currencies.

Federal Reserve Rate Cuts: The timing of the first Federal Reserve rate cut is a major question mark for markets, with some investors now pricing in a delay until September due to the strong inflation data. This shift in expectations has caused some volatility in stock markets. The ECB is also considering rate cuts, with some members favoring a cut as early as April to stimulate the Eurozone economy. However, a dovish shift from the ECB could further weaken the Euro compared to the US Dollar.

Gold Price Correction: The recent rise in the Gold price is seen as unsustainable in the short term, with analysts believing a correction is likely due to the lack of fundamental support, such as a global recession, and the possibility of further delays in Fed rate cuts. However, the long-term outlook for Gold is still positive due to expectations of future rate cuts, as lower interest rates make non-yielding assets like Gold more attractive to investors.

Next Week’s Economic Calendar Highlights

High Impact:

  • Monetary Policy Decisions:
    • BoJ Interest Rate Decision (March 19th, 3:00 AM EDT) and BoJ Monetary Policy Statement (March 19th, 3:00 AM EDT)
    • RBA Interest Rate Decision (March 19th, 3:30 AM EDT) and RBA Rate Statement (March 19th, 3:30 AM EDT)
    • PBoC Interest Rate Decision (March 20th, 1:15 AM EDT)
    • Fed Interest Rate Decision (March 20th, 6:00 PM EDT), FOMC Economic Projections (March 20th, 6:00 PM EDT), Interest Rate Projections (March 20th, 6:00 PM EDT), and FOMC Press Conference (March 20th, 6:30 PM EDT)
    • SNB Interest Rate Decision (March 21st, 8:30 AM EDT) and SNB Monetary Policy Assessment (March 21st, 8:30 AM EDT)
    • BoE Interest Rate Decision (March 21st, 12:00 PM EDT), Monetary Policy Report (March 21st, 12:00 PM EDT), and BoE Minutes (March 21st, 12:00 PM EDT)
  • Economic Data:
    • Retail Sales (YoY) for China (March 18th, 2:00 AM EDT)
    • Industrial Production (YoY) for China (March 18th, 2:00 AM EDT)
    • Consumer Price Index (YoY) for Canada (March 19th, 12:30 PM EDT)
    • Consumer Price Index (MoM) for Canada (March 19th, 12:30 PM EDT)
    • Gross Domestic Product (YoY) for New Zealand (March 20th, 9:45 PM EDT)
    • Gross Domestic Product (QoQ) for New Zealand (March 20th, 9:45 PM EDT)
    • Employment Change for Australia (March 21st, 12:30 AM EDT)
    • Unemployment Rate for Australia (March 21st, 12:30 AM EDT)
    • Philadelphia Fed Manufacturing Survey (March 21st, 12:30 PM EDT)
    • Initial Jobless Claims (March 21st, 12:30 PM EDT)
    • S&P Global Manufacturing PMI (March 21st, 1:45 PM EDT)
    • S&P Global Composite PMI (March 21st, 1:45 PM EDT)
    • Existing Home Sales (MoM) for US (March 21st, 2:00 PM EDT)
    • Retail Sales (MoM) for UK (March 22nd, 7:00 AM EDT)

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