Optimism Seen in Markets Ahead of FOMC Verdict
16 March 2022
Sentiment appears optimistic on Wednesday as investors remain hopeful for a diplomatic solution to the Russia-Ukraine crisis, undermining the US dollar broadly.
The EURUSD pair was attacking the 1.10 threshold again, Cable moved higher from the key support at 1.30, and commodity-linked currencies also advanced, following commodities.
US indices staged an impressive rally yesterday, with EU bourses rising as well today, bringing the German DAX some 300 points above the critical 14,000 EUR threshold.
Later today, US retail sales for February are due, expected to deteriorate sharply from January levels. Additionally, the Canadian inflation data will be released, likely influencing the USDCAD pair.
However, the FOMC will announce its monetary policy decision after that. The market expects a 25 bps rate increase. Still, the following statement will be of crucial importance - whether the central bank adopts a more hawkish stance for the rest of the year, considering the massive uptrend in inflation.
More hawkish Fed could put more pressure on US bonds, sending their yields further higher. This week, the two and ten-year yields rose to new cycle highs as inflation poses a huge global problem.