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Federal Reserve Officials Suggest Monetary Tightening, Markets Respond Positively


Recent market gains were heavily influenced by statements from Federal Reserve officials who suggested the need for further monetary tightening, despite recent bank failures. Boston Fed President, Susan Collins, highlighted the importance of tightening policies. Meanwhile, Richmond Fed President, Thomas Barkin, stated that the Fed could increase rates further if inflation risks persist. Minneapolis Fed President, Neel Kashkari, expressed his commitment to bringing inflation back to 2% but also acknowledged that the impact of recent financial-system turmoil is not fully clear.

While some investors anticipated a decrease in US interest rates by around 70 basis points to 4.3% by year-end, some strategists disagree with the market’s expectations of rate cuts this year. Despite financials being under pressure, the S&P 500 benchmark gained 0.6%. The tech-heavy Nasdaq 100 also rose 0.9%, pushing further into a bull market. Ten out of eleven sectors in the S&P 500 remained in positive territory, with the Real Estate sector achieving the best performance among all groups, rising 1.22% for the day. Additionally, the Dow Jones Industrial Average rose 0.4%, while the MSCI world index rallied by 1.2% daily on Thursday.

Main Pairs Movement

The US Dollar experienced a 0.46% daily loss due to data on Thursday showing a moderate increase in Americans filing new claims for unemployment benefits. However, there were no significant signs that tightening credit conditions were impacting the tight US labor market. The DXY index remained weak for the day, with heavy selling during the UK trading session, closing at 102.17 level at the end of the day.

On the other hand, the euro rose to a one-week high against the US dollar on Thursday, boosted by German inflation data and a decrease in concerns over the banking sector. The EURUSD surged by 0.56% on Thursday, reaching the weekly high of 1.0926 level ahead of the American trading hour, and closed at 1.0905 level. Additionally, the GBPUSD also experienced a 0.58% daily gain.

Gold witnessed a significant rally on Thursday, experiencing an 0.80% daily gain and reversing the previous week’s loss ahead of key inflation data from the United States and Eurozone. The XAUUSD saw demand during American trading hours and touched the weekly high of the $1984 mark.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CNYManufacturing PMI (Mar)09:3051.5
GBPGDP (QoQ) (Q4)14:000.0%
GBPGDP (YoY) (Q4)14:000.4%
EURGerman Unemployment Change (Mar)15:553K
EURCPI (YoY) (Mar)17:007.1%
USDCore PCE Price Index (MoM) (Feb)20:300.4%
CADGDP (MoM) (Jan)20:300.3%
EURECB President Lagarde Speaks23:00