Focus of The Day – Daily Market Report, March 20.
The Federal Reserve’s imminent policy meeting has sparked widespread anticipation, focusing on maintaining interest rates amidst inflation concerns and a slight uptick in unemployment. Analysts are particularly keen on the Fed’s economic projections and the “dot plot,” which might hint at the future trajectory of interest rates. While a cautious stance on rate reductions is expected, the exact timing and magnitude of such adjustments are eagerly awaited, with a consensus pointing towards potential cuts in 2024.
At the heart of the Fed’s strategy is the challenge of balancing the fight against persistent inflation with the need to support an increasingly fragile labor market. The Fed aims to steer inflation towards its 2% target before considering any easing of borrowing costs, despite the recent rise in unemployment.
Additionally, the Federal Reserve’s approach to its balance sheet will be a focal point of the upcoming meeting, with no immediate changes expected in the pace of quantitative tightening. The discussion is set to shed light on the Fed’s long-term monetary strategy, including the anticipated gradual reduction of its balance sheet.
POINT OF VIEW:
Since 1985, the Bank of Japan has initiated three rate hike cycles, with each initial increase followed shortly by a global recession.
On March 18th, investors actively bought Nvidia call options with a strike price of $1940, while Bank of America suggests that the NVIDIA GTC AI 2024 conference could further boost the company’s stock value. Nvidia (#NVIDIA) is up 1.07% today.
Amid China’s property market challenges, private credit investors are pivoting towards the technology sector, including fintech and healthcare, attracted by lower borrowing costs and promising growth prospects. CSI 300 and HK 50 are up 0.17% and 0.36% today, respectively.
Banks such as Barclays and Citi expect a possible rate cut by the Swiss National Bank this Thursday to mitigate potential currency appreciation. However, most economists see Switzerland’s robust economy as a reason to delay a rate cut until June.
Currency Market:
Euro Dollar
After a slight drop, EUR/USD returned to the 38.2 Fibonacci level and is testing resistance. Indicators give multidirectional signals, creating two scenarios.
Overcoming the resistance at 1.0870 will allow EURUSD to rise to 1.0970, corresponding to 61.8 Fibonacci. A rebound from the resistance will drop the price to 1.0800.
GOLD MARKET
After updating the high, XAUUSD moves in a descending channel, and the price tests the channel’s upper boundary. If Gold breaks the upper trend line and rises above 2160, it could rise to 2185. However, if the price bounces off the trendline, it will continue to rise to 2140.