Market focus: Will the Fed raise interest rates?

　　

What happened in the market last week?

• Market volatility was high due to scheduled and non-scheduled news events.
• The banking sector was navigating stormy waters as a crisis originating from SVB spread throughout European financial institutions.
• Credit Suisse stocks fell as Saudi National Bank refused to buy more shares due to regulatory restrictions.
• The market moved into a risk-off environment, and JPY benefited.
• European Central Bank hiked rates by 50 basis points to fight inflation.
• ECB will support the banking sector if needed, calming markets slightly.
• Federal Reserve to announce rate this week.
• Many investors think US central bank will hold rates despite the recent Core CPI increasing above expectations at 0.5%.

Last Week Market Pair Changes (All data is taken from the MT4 VT Markets)

The USD experienced a slight decrease in value last week due to market sentiment.

• Gold continued to gain strength, increasing by 6.01%.
• The EURUSD was slightly lower by 0.15%.
• The GBPUSD was stronger by 0.82%.
• The USDX decreased by 0.11%. USDJPY also declined by 2.00%.
• In US Indices, the DJ30 was the only major U.S. equity benchmark to finish the week with a 0.75% drop, while the Nasdaq increased by 5.07%.
• USOUSD (WTI) ended the week lower by 13.58%.

What to focus on this week?

All eyes are on the upcoming FOMC rate statement, with analysts predicting another 25bps increase to 5%. The Bank of England is also expected to raise rates by 25bps to 4.25%. Other important releases include Canada’s CPI and UK’s PPI, as well as UK and US Flash Services and Manufacturing PMI. The Swiss National Bank is predicted to increase interest rates by 50bps to 1.5%.

Here are key events to watch out for:

21 March 2023 | Canada Consumer Price Index

Canada’s CPI increased 0.5% in January 2023 from the previous month. 

Analysts anticipate a 0.3% increase in February.

22 March 2023 | UK Producer Price Index

The CPI in the UK fell 0.6% month-on-month in January 2023, the first decline in a year and the biggest drop since January of 2019.

Analysts expect a 0.5% increase in February.

23 March 2023 | FOMC Rate Statement

The Fed raised the target range for Fed funds by 25bps to 4.5%-4.75% in its February 2023 meeting.

Analysts anticipate the Fed will raise another 25bps to 5% at its next meeting. 

23 March 2023 | Swiss National Bank Rate Statement

The SNB brought its interest rate out of the negative territory with two rate hikes in September and December 2022, ending the year with a 1% interest rate. The central bank also indicated that future rate hikes may be required to maintain price stability over the medium term.

Analysts predict that SNB will increase interest rates by 50bps to 1.5% at this month’s meeting.

23 March 2023 | Bank of England Rate Statement

During its February meeting, the BoE voted 7-2 to raise interest rates by 50bps to 4%.

Analysts predict that the next increase will be at 25bps to 4.25%.

24 March 2023 | UK and US Flash Services and Manufacturing PMI

In February 2023, the UK Services PMI was revised to 53.5 from 48.7, and the UK Manufacturing PMI to 49.3 from 47. Meanwhile, the US Services PMI came in at 50.6 during the same period, above January’s 46.8. 

Analysts anticipate lower releases of the UK Flash Manufacturing and Services PMIs for February, at 48.3 and 50.7, respectively. The US Flash Services is expected to be released lower at 50.1.

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