Forex Today: Dollar up ahead of Fed and as fear rules

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What you need to take care of on Wednesday, March 16:

The dollar started the day on the back foot but managed to recover the ground lost during US trading hours. The EUR/USD pair is trading at around 1.0940, while GBP/USD changes hands at 1.3035.

President Vladimir Putin said Kyiv is not serious about finding a mutually acceptable solution. The news cooled hopes for a diplomatic agreement. Earlier in the day, Ukraine President Volodymyr Zelenskyy’s adviser said they were confident they could reach a diplomatic solution in the next few weeks.

Beyond sanctions, Russia submitted a request to leave the Council of Europe after being suspended on February 25. Additionally, Moscow announced a series of sanctions on US authorities, including President Joe Biden and banned Canadian Prime Minister Justin Trudeau from entering the country.

European Central Bank President Christine Lagarde spoke at the WELT Economic Summit and noted that the uncertainty surrounding the economic outlook had increased dramatically, as the war would reduce growth and create inflation due to increasing energy and commodities costs. She also said that inflation is still forecast to decline gradually and settle near the central bank’s 2% target by 2024.

China announced record coronavirus contagions and put over 17 million people into strict lockdown, dampening economic growth expectations. Stocks and commodities were on the back foot amid concerns related to decreased demand throughout the first half of the day.

Gold bottomed at $1,907.04 a troy ounce, bouncing modestly ahead of the close to settle around $1,920 a troy ounce. Crude oil prices extended their latest decline, and WTI ended the day at $96.50 a barrel.

The AUD/USD pair spent the day inside a tight range, ending the day little changed sub-0.7200. The Canadian dollar benefited from falling oil prices and soaring commodities, resulting in USD/CAD falling to 1.2766.

Wall Street posted substantial gains despite mounting concerns related to the Russia-Ukraine crisis. US government bond yields were up, with the yield on the 10-year Treasury note reaching a multi-week high of 2.169%, finishing the day nearby.

The market’s focus shifts now to the US Federal Reserve, as the US central bank will announce its monetary policy decision on Wednesday and is expected to trigger a rate hike of at least 25 bps.

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