A series of strong U.S. data this week cast doubt on the timing of the Federal Reserve's first interest rate cut. All three major U.S. stock indexes closed lower on Friday. The Nasdaq and S&P fell for two weeks in a row, and the Dow Jones Industrial Average fell for three weeks in a row. However, European stock markets rose for the eighth consecutive week, the longest winning streak since 2018, driven by optimism about interest rate cuts.
Bitcoin fell from its all-time high, while the U.S. dollar index recorded its largest weekly gain since mid-January. The performance of the Japanese yen, which has been bolstered by rumors of interest rate hikes, has been disappointing. The US dollar rose more than 0.5% against the yen on Friday.
Gold prices fell for the first time in four weeks, falling below $2,160 an ounce. The conflicts between Russia, Ukraine, and Palestine and Israel have escalated again. Crude oil has risen nearly 4% this week, and U.S. oil has returned to the $80 mark. It is worth noting that copper prices suddenly exploded, with Lun Copper rising above $9,000 for the first time in 11 months, rising nearly 6% in a week.
The market war of the new week is about to begin. Investors will usher in the week with the most intensive central bank decisions so far in 2024. The Federal Reserve and the Bank of Japan will dominate this central bank interest rate week, which accounts for nearly half of the global economy. Please sit tight and support.
The following are the key points that the market will focus on in the new week (all Beijing time):
Central Bank News: The Federal Reserve leads Super Central Bank Week, will gold bulls break out again or is a collapse imminent?
Fed: Spotlight on the Dot Plot
At 02:00 on Thursday, the Federal Reserve released a summary of its interest rate decision and economic expectations.
At 02:30 on Thursday, Federal Reserve Chairman Powell held a monetary policy press conference
The Federal Reserve's decision early Thursday morning and Powell's press conference are undoubtedly the most important. Investors will be able to explore whether still-strong U.S. economic data will cause Fed officials to abandon their intention to cut interest rates, or whether their expectations for three rate cuts this year remain on track.
It is almost a foregone conclusion that the Federal Reserve will not change interest rates next week, and the focus of the market is on the dot plot. Updated forecasts from the Federal Reserve are likely to show continued strong growth in the U.S. economy. Most economists surveyed by Bloomberg expect policymakers to plan three rate cuts in 2024, with the first in June, but more than a third expect a hawkish surprise of fewer rate cuts.
Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said: "The biggest risk next week is that the dot plot that is the global focus is showing a 50 basis point rate cut this year, not 75 basis points." It is worth noting. What's more, Friday's interest rate swap pricing showed that by December this year, the market expected an interest rate cut of less than 75 basis points. On the same day, U.S. economists at JPMorgan Chase updated their forecasts. They now expect the Fed to cut interest rates by 75 basis points this year, instead of the previous 125 basis points.
Commerzbank predicts that gold prices could hit a new record if the Fed's new forecasts and Fed Chairman Jerome Powell's speech at a press conference are interpreted as increasing the likelihood of a faster rate cut. Goldman Sachs believes that the most likely trend for gold prices in the near future is to enter another consolidation phase.
Analysts at Dailyfx said that if policymakers signal their intention to reduce interest rates, we could see bond yields and the dollar move higher. This should be negative for gold prices. Gold prices are managing to hold on to the support at $2,150. Bulls must aggressively protect this technical area to prevent selling pressure from escalating; failure to do so could trigger a retracement towards $2,085. In case of further weakness, the focus will be on $2,065. On the other hand, if the bulls regain control of the market and trigger a bullish reversal from current levels, the first level of resistance lies at the record high set earlier this month at 2195, with further upside raising concerns about the trendline near 2205. Resistance concerns.
Other central banks: Is the Bank of Japan imperative?
At 11:30 on Tuesday, the Reserve Bank of Australia announced its interest rate decision; at 12:30, Reserve Bank of Australia Chairman Bullock held a monetary policy press conference.
On Tuesday, the Bank of Japan announced its interest rate decision (the specific time is to be determined); at 14:30, Bank of Japan Governor Kazuo Ueda held a monetary policy press conference
At 16:45 on Wednesday, European Central Bank President Lagarde delivered a speech
At 01:30 on Thursday, the Bank of Canada released the minutes of its March monetary policy meeting.
At 16:30 on Thursday, the Swiss National Bank announced its interest rate decision
At 20:00 on Thursday, the Bank of England releases its interest rate decision and meeting minutes
The Bank of Japan's decision on Tuesday will be the most closely watched in decades as officials decide whether to end the world's last period of negative interest rates now or wait until April. Rengo, Japan's largest union, announced that it had secured a 5.28% wage increase, the largest increase in 30 years. According to Nikkei, the Bank of Japan’s main plan is to adjust short-term interest rates to a range of 0%-0.1%. Mitsubishi UFJ Morgan Stanley Securities chief bond strategist said the Bank of Japan may abandon negative interest rates and yield curve control (YCC) next week given the stronger-than-expected outcome of wage negotiations. Taro Saito, director of economic research at NLI Research Institute, said that if the Bank of Japan remains on hold now, the market will become volatile and the yen may plummet.
Also on Tuesday, the Reserve Bank of Australia is likely to keep its cash rate at 4.35% after inflation data for January came in below expectations. Investors will be watching to see whether the Fed maintains its hawkish stance or signals a possible shift in the next few months.
For Thursday's SNB decision, most economists expect it to be on hold, although two respondents in a Bloomberg survey expected officials to cut interest rates rather than wait for larger central banks to begin their easing cycles.
Bank of England policymakers will see new inflation data on Wednesday and the latest PMI data on Thursday before deciding whether to keep interest rates on hold. With consumer price growth slowing but still likely to remain well above the 2% target, the Bank of England is in no rush to ease policy. Observers are likely to focus on the outcome of the vote among officials on the central bank's monetary policy committee, which could see a tripartite situation emerge again between those who want to keep rates unchanged and those who support a rate cut or hike.
"After abandoning its tightening bias at its February meeting, we don't think the MPC would mind changing its guidance," Bloomberg Economics' Dan Hanson and Ana Andrade wrote in a note. "The tone may come in May." A bigger transformation.”
ING said the Bank of England is expected to reiterate next Thursday that interest rates need to remain restrictive for an extended period, suggesting it is too early to consider policy easing. Analysts at BNP Paribas continue to be optimistic about the pound, saying that if the Bank of England closes the door to interest rate cuts, it will support the pound.
Important data: The data tide is fierce, and the U.S. index is expected to return to 104
18:00 on Monday, Eurozone February CPI monthly rate/annual rate final value
Tuesday 20:30, Canadian February CPI monthly rate
At 15:00 on Wednesday, the German PPI monthly rate in February, the British CPI monthly rate in February, and the British retail price index in February monthly rate
Thursday 08:30, Australia’s seasonally adjusted unemployment rate in February
European trading on Thursday, France/Germany/Eurozone March manufacturing PMI initial value, UK March manufacturing/services PMI
Thursday 20:30, US initial jobless claims, US fourth quarter current account, US March Philadelphia Fed manufacturing index
Friday 07:30, Japan’s February core CPI annual rate
Friday 15:00, UK February seasonally adjusted monthly retail sales rate
Friday 20:30, Canadian January retail sales monthly rate
In addition to the central bank decision, next week's data wave will also be fierce. ING believes that the U.S. dollar index is expected to return to 104 before the Federal Reserve's decision. The U.S. dollar next week will be more dependent on data rather than the Federal Reserve's forward guidance. Regardless of whether Powell is hawkish or not, the recent strength of U.S. data will hardly encourage a massive sell-off of the U.S. dollar.
The Eurozone, which has recently been under pressure to cut interest rates, will release February CPI on Monday. Previously, as inflation in the Eurozone fell less than expected in January, which poured cold water on expectations of an interest rate cut by the European Central Bank, investors can pay attention to whether the data this time can live up to their expectations. Several members of the European Central Bank have expressed an openness to cutting interest rates in June, which has also been motivating European stock markets to rise.
Alex Cohen and Michalis Rousakis, FX strategists at Bank of America Research, said in a note that the Federal Reserve's upcoming interest rate cut should have a greater impact on foreign exchange markets than the European Central Bank's rate cut. Bank of America expects the U.S. dollar to weaken and expects EUR/USD to rise to 1.15 by the end of the year, from the current level of 1.0942.
Next week there will also be abundant data in the UK. The February CPI will be released the day before the Bank of England's decision. The importance is self-evident. The overall annual inflation rate is expected to drop to 3.6% from 4% in January. That would mark another two-year low, cementing a clear downward trend and keeping hopes of a rate cut alive.
Sterling has outperformed 92% of global currencies so far this year, supported by the idea that whenever the Bank of England decides to cut interest rates, it will be after the Federal Reserve. Obviously, if anything happens that causes the market to rethink this, it will send GBP/USD lower. The Fed may now be more cautious than the market expects, which may make it harder for GBP bulls to gain ground.
Dailyfx analysts said that the pound/dollar is currently vulnerable to selling pressure when approaching the psychological resistance level of 1.28, but bears tend not to push it too low and can focus on the support level of 1.26602. The callback support level of 1.24916 also continues to support the pound. A sustained break above 1.28 would be a very bullish sign and bring last July's peak back into focus.
Company financial report:
A number of heavyweight technology stocks will be released next week, including Tencent Holdings (00700.HK), Meituan (03690.HK), Xiaomi Group (01810.HK), China Mobile (00941.HK), PetroChina (00857) .HK), etc.; U.S. stocks such as Pinduoduo (PDD.O) and Xpeng Motors (XPEV.N) will also announce results. Another highlight next week is the Nvidia GTC Conference, which will be held simultaneously at the San Jose Convention Center and online from March 18th to 21st. According to NVIDIA’s official public account, more than 77 ecosystem partners and more than 25 partner robots will be unveiled at GTC to demonstrate the future development trend of the robot industry.
Market closing arrangements
On Wednesday (March 20), Japan-Tokyo Stock Exchange will be closed for one day due to the Spring Equinox.
NYMEX New York crude oil April futures are affected by the month shift. The last transaction on the floor will be completed at 2:30 on March 21, and the final electronic transaction will be completed at 5:00 in the morning. Please pay attention to the expiry month change announcement of the trading venue to control risks. In addition, the expiration time of U.S. oil contracts on some trading platforms is usually one day earlier than the official NYMEX, so please pay more attention.
Article forwarded from: Golden Ten Data
