Forex News for 24 March 2023
- The US Federal Reserve has raised interest rates by 0.25% for the second consecutive meeting to combat high inflation. The benchmark rate now stands at 4.75% to 5%, the highest since 2007.
- Despite the belief that the aggressive rate-raising policy has contributed to the stress in the banking system, the Federal Open Market Committee (FOMC) remains committed to reducing inflation.
- Annualized inflation in the US has fallen to 6% in the year to February, an eighth consecutive monthly fall in annualized prices, and a drop from the 9.1% June peak. However, month-on-month inflation rose by 0.4%.
- While the CME FedWatch Tool indicated that 86.4% of respondents believed there would be a rate hike of 0.25%, over 56% of them believe that the rate rise phase will finally be paused after the next FOMC meeting on 2nd to 3rd May, indicating that we may have seen the last rate hike within the current tightening cycle in the USA.
- The FOMC reiterated that its long-run target is to bring down inflation to its 2% target and signaled that there could be a continuation of the rate rise cycle to achieve it.
- The US Dollar Index ended the day lower by 0.62%, reflecting the market sentiment that further rate hikes are unlikely.
- In March, the U.K. GfK consumer confidence index showed a rise from -38 to -36, which is slightly lower than the estimated figure of -35. The increase is a sign of recovery from the historically low levels, and was driven by improvements in measures for personal financial situation and the general economic situation.
- The Japanese flash manufacturing PMI for March increased from 47.7 to 48.6, indicating a slower pace of contraction compared to the estimated figure of 48.2. This was driven by an increase in output, which rose at its fastest rate in nine months.