Dollar remains sluggish ahead of crucial FOMC decision
The US dollar is extending yesterday’s retreat despite the minor uptick in US Treasury yields, while attention is now shifting to the outcome of the Fed’s monetary policy meeting later today. The Fed is highly anticipated to proceed with what is set to be the first in a series of rate hikes as an effort to tackle the persistently high inflation. Moreover, the Fed will also reveal the dot plot of each member’s interest rate projections, which is expected to reflect how the ongoing surge in commodity prices and the financial sanctions imposed on Russia have influenced policymakers’ views over the upcoming tightening cycle. Finally, the markets will be eyeing for concrete guidance over the reduction of the Fed’s balance sheet as well as the renewed inflation and growth forecasts.
On the data front, retail sales in the US rose by 0.3% on a monthly basis in February against the expectation of a 0.4% increase. Nevertheless, the disappointment was offset by January’s print that got revised higher to 4.9% from 3.8%. The greenback did not react significantly on that dataset.
Euro resumes its advance despite negative outlook
The euro is nudging higher in the current session, capitalizing on the moderate risk-on mood in the markets following Russian foreign minister Sergey Lavrov’s remarks that peace talks are not easy but there is certainly hope for compromise. Meanwhile, Ukrainian President Volodymyr Zelensky also communicated that peace negotiations with Russia are beginning to sound more realistic. However, ECB chief Christine Lagarde stated that the Russia-Ukraine war continues to dampen economic growth and increase inflationary pressures in the Eurozone through higher energy and commodity prices. Therefore, it seems that the ECB is unwilling to proceed with aggressive monetary tightening for now, leaving the single currency in a disadvantageous spot against the higher-yielding currencies.
US stock futures inch higher amid renewed optimism over the ceasefire talks
Wall Street is set to open higher today and extend yesterday’s gains as investors seem to be feeling more optimistic over the developments in the Russia-Ukraine peace negotiations, while also awaiting the Fed’s monetary policy decision. More specifically, e-mini futures for the Nasdaq, S&P 500 and Dow Jones are edging higher in pre-market trade, currently gaining 1.5%, 1% and 0.9% on the day, respectively. Additionally, most major European indices are trading modestly higher today, benefiting from the improving risk sentiment.
Oil trades slightly higher; gold stabilizes
WTI futures are up 1% in a volatile session despite being pressured by worries about the demand outlook, originating from the progress in Russia-Ukraine peace talks and China’s new wave of lockdowns. Gold is also holding steady today as the downside pressures stemming from the risk-on sentiment and rising Treasury yields appear to be offset by the softer dollar.
In other news, nickel trading on the London Metal Exchange (LME) resumed today but it already triggered the new limits set out by the exchange, which state that price moves will be constrained to 5% above or below the last closing price
