Market Drivers – US Session: FOMC, BoJ In Focus

The forex market finds itself amidst a confluence of factors, creating a landscape of heightened uncertainty. The US Dollar, under significant pressure, has continued its downward trajectory for the third consecutive day, revisiting multi-month lows. This retreat is largely attributed to growing caution among investors ahead of the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday. Alongside the anticipation surrounding the Fed’s interest rate decision, persistent tariff fears and simmering geopolitical tensions are further contributing to the Greenback’s weakness.

The US Dollar Index (DXY) has reflected this downward trend, retesting the 103.20 zone. This movement coincides with deflating US yields, amplifying the cautious sentiment prevailing in the market. In addition to the Fed’s announcement, market participants are closely monitoring the release of weekly MBA Mortgage Applications, TIC Flows, and the Energy Information Administration’s (EIA) weekly report on US crude oil inventories.  

In contrast, the Euro has capitalized on the Dollar’s weakness. EUR/USD has surged to new multi-month highs, surpassing the 1.0950 mark. This upward movement is driven by the Dollar’s depreciation. Traders are also awaiting the release of the final Inflation Rate in the Eurozone, along with the Labour Cost Index and Wage Growth figures. Furthermore, speeches by European Central Bank (ECB) officials De Guindos and Elderson are anticipated to provide further insights into the Eurozone’s economic outlook.  

The British Pound has also witnessed a significant surge, with GBP/USD surpassing the 1.3000 milestone for the first time since early November. This promising start to the week is likely to be sustained as the market looks forward to the UK labor market report and the Bank of England’s (BoE) interest rate decision on March 20.  

USD/JPY has extended its advance for the third consecutive day, briefly approaching the key 150.00 barrier before retreating to the 149.00 area. The Bank of Japan (BoJ) meeting is expected to be the focal point for this pair, followed by the release of Balance of Trade results, Machinery Orders, Capacity Utilization, and final Industrial Production figures.

AUD/USD, after revisiting monthly highs around 0.6390, has come under pressure, reversing two consecutive days of gains. The Westpac Leading Index is the sole economic release from Australia.

In the commodities market, American WTI crude oil prices have resumed their downtrend, facing renewed downside pressure after reaching multi-day highs above $68.00 per barrel. Traders are closely monitoring geopolitical developments and the ongoing tariff discussions.  

Gold prices have reached an all-time high near $3,040 per troy ounce, driven by renewed tensions in the Middle East and rising uncertainty surrounding US tariffs. Silver prices have also surged, surpassing $34.20 per ounce for the first time since late October.  

Overall, the forex market is navigating a period of heightened volatility, influenced by central bank decisions, geopolitical events, and trade policy uncertainties. Investors are advised to remain vigilant and closely monitor these developments for potential market-moving events.