Market reviews

With the big central bank meetings out of the way, this week brings with it the latest CPI data from the eurozone and focus on the Fed’s favoured inflation measure.

The dollar traded mixed against it peers in a narrow range yesterday and ahead of the pivotal FOMC rate decision later today. Investors have appeared a little more confident after the sharp selloff in risky assets early on Monday morning.

The European Central Bank is set to announce its rate decision at 13:15 GMT today (Thursday, March 16th). In short, EURUSD is perhaps likelier to react to market sentiment, rather than the fundamental actions of the ECB today.

More tightening would be good for the dollar which has struggled with the banking contagion issues.

All eyes were on Fed Chair Powell and his semi-annual testimony to the Senate Banking Committee on Tuesday. And he grabbed the headlines big time as he chose to go large on his inflation-fighting credibility.

Get ready for a rollercoaster ride across global FX markets this week! The calendar in focus for investors and traders is packed with central bank meetings and rate decisions, a semi-annual Congress appearance from the most powerful banker in the world, and the latest US jobs report.

Last month was strong on upbeat US economic data and hawkish Fedspeak, with some officials putting 50bp rate hikes back on the table at their meeting in a few weeks’ time. Money markets have strongly repriced the Fed rate hike cycle with the peak rate up towards 5.50% seen in the summer.

We get fresh inflation numbers out of the eurozone on Thursday with the headline reading expected to reveal a modest slowdown.

The latest theme in FX markets has been characterised by the recent big bounce back in both nominal and real USD rates and the general re-tightening of global financial conditions.

Amid a holiday-shortened week for US equities, FX markets will continue looking out for the latest clues surrounding the Fed’s intentions for raising US interest rates.

The latest US CPI data showed us that the headline rate for prices rose 6.4% in January – a small slowdown from the prior month but higher than economists had predicted.

The recent move higher in the greenback for dollar bulls has stalled after Fed Chair Powell offered little new to his previous comments from last week’s FOMC meeting.

The Reserve Bank of Australia’s policy meeting on Tuesday is expected to see another 25bps hike which takes the benchmark cash rate to 3.35%.

All eyes are on the FOMC later today. A 25bp rate hike is nailed on so the focus will be on what Chair Powell has to say, both in the statement and his press conference.