Market Drivers; US Session, March 21

As investors continued to process the most recent FOMC meeting and the prospect of three rate reduction by the Fed this year, risk aversion made a comeback on Thursday across markets and traded assets, giving the dollar additional impetus. Apart from that, the BoE maintained rates and hinted at potential rate reductions in the future.

Economic Data

The S&P Global Manufacturing and Services PMIs both hit above 50 at the beginning of March, a sign of robust business activity in the US private sector. While the S&P Global Manufacturing PMI increased to 52.5 in February, the S&P Global Composite PMI was marginally lower at 52.5. To 51.7, the S&P Global Services PMI dipped slightly.

According to the survey results, there should be another quarter of strong GDP growth, ongoing hiring, and new order growth. Due to a sharp increase in prices and increased pricing power in the context of the current demand recovery, inflationary pressures picked up speed once more in March. The US Dollar Index kept becoming stronger; it was last spotted increasing, to eventually settle slightly below the 104.00 mark, namely at 103.990.

Key Developments

After Wednesday’s post-FOMC dip, the USD Index (DXY) traded with strong gains and continued its upward trajectory. Other than the speeches by FOMC members M. Barr and R. Bostic, there are no other scheduled events on the US docket for the end of the week.

The significant rise seen in the previous session was quickly faded as EUR/USD gave in to the Dollar’s surge and fell back to the 1.0850 region. Germany will publish its IFO Business Climate on March 22.

The higher dollar and the BoE’s dovish stance caused the GBP/USD pair to tumble to the mid-1.2600s, as it was unable to maintain a gain to levels just over 1.2800. The Gfk Consumer Confidence print and retail sales will take central stage throughout the channel on March 22.

The USD/JPY pair continued to rise after the BoJ meeting, flirting once more with the YTD highs at 151.80. Market players were still selling the yen at this point. The weekly readings from Foreign Bond Investment and the Inflation Rate are included in the domestic calendar on March 22.

Despite a strong labour market report, the AUD/USD pair eventually gave up its early gains and ended the session with slight losses. On March 21, the RBA’s Consumer Inflation Expectations will be the focus of attention.

Commodities

WTI prices lost over $3 since recent peaks north of the $83.00 yardstick, contributing to Wednesday’s pullback and approaching the crucial $80.00 mark per barrel.

Gold prices reached an all-time high above $2,220 per troy ounce, although they finished the session with slight losses on the dollar’s comeback.

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