CFD Markets News and Forecasts — 17-03-2024

The European Central Bank (ECB) Governing Council member Klaas Knot said that he expects to begin lowering borrowing costs in June, even though it’s premature to say inflation has been defeated.  He further stated that it was rare for rate hikes as the ECB has carried out and did not hurt the economy and that inflation had remained low without triggering a recession.

Key quotes

“I personally penciled in June to start cutting rates,”  

“Where we take it from there is data dependent.”

Market reaction

At the time of writing, the EUR/USD pair is trading lower at 1.0883, down 0.05% on the day.

• AUD/USD loses ground near 0.6560 in Monday’s early Asian session. 
• The RBA is anticipated to leave its key interest rate unchanged at 4.35% on Tuesday. 
• The US FOMC is likely to hold its benchmark rate at its March meeting on Wednesday as inflation remains elevated.

The AUD/USD pair trades on a negative note above the mid-0.6500s during the early Asian session on Monday. Markets are likely to trade quietly ahead of the Reserve Bank of Australia (RBA) and the US Federal Open Market Committee (FOMC) interest rate decisions on Tuesday and Wednesday, respectively. The major pair currently trades around 0.6560, down 0.01% on the day. 

The RBA is expected to hold its key interest rate at 4.35% for a third consecutive meeting at its March meeting scheduled for Tuesday. Furthermore, investors anticipate the Australian central bank to retain a mild tightening bias and see at least two rate cuts in the final quarter of 2024. The timing of RBA easing may depend on when the US Federal Reserve (Fed) begins cutting rates, which is estimated in the June meeting. However, any surprise dovish remarks from the RBA after the policy meeting might drag the Australian Dollar (AUD) lower against the US Dollar (USD).

On the other hand, the Fed is likely to maintain its monetary policy at its March meeting amid the uptick in inflation in the US. The Fed Chairman Jerome Powell warned in recent weeks about cutting interest rates too early and emphasized a “data-dependent” approach to ensure inflation returns to the 2% target firmly. 

On Friday, the preliminary US University of Michigan Consumer Sentiment Index eased to 76.5 in March from 76.9 in February, weaker than the market expectation of 76.9. Additionally, the one-year and five-year inflation expectations were unchanged at 3.0% and 2.9%, respectively.

Looking ahead, the RBA will announce its interest rate decision on Tuesday, while the Fed will announce it on Wednesday. Traders will take cues from these events and find trading opportunities around the AUD/USD pair.

New Zealand’s Business NZ Performance of Services Index (PSI) improved to 53.0 in February from the previous reading of 52.1, according to Business NZ on Monday. 

Market Reaction

At the press time, the NZD/USD pair is up 0.03% on the day to trade at 0.6086.

About the Business NZ Performance of Services Index (PSI)

The Business NZ Performance of Services Index (PSI), released by Business NZ on a monthly basis, is a leading indicator gauging business activity in New Zealand’s services sector. The data is derived from surveys of senior executives at private-sector companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production or employment. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the New Zealand Dollar (NZD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for NZD.