March 16, 2022

EUR/USD extended its sideways consolidative price move and remained confined in a range. The Ukraine crisis, hawkish Fed expectations underpinned the USD and acted as a headwind. Investors also seemed reluctant and preferred to wait for the outcome of the FOMC meeting. The EUR/USD pair edged higher on Tuesday and moved away from the weekly low touched the previous day, though the uptick lacked bullish conviction. Despite the fact that several rounds of peace talks between Russia and Ukraine have failed to deliver a breakthrough, investors remain hopeful about a possible diplomatic solution to end the war. The optimism was evident from the risk-on impulse in the financial markets, which prompted some intraday selling around the safe-haven US dollar and extended support to the major. That said, Russian forces have stepped up their aggression in Ukraine and intensified bombardment of Ukrainian cities. Given its geographical proximity, worries that the European economy would suffer the most from the spillover effects of the Ukraine crisis acted as a headwind for the shared currency. This was reinforced by the German ZEW Economic Sentiment Index, which deteriorated sharply to -39.3 for March from 54.3 in the previous month. Apart from this, hawkish Fed expectations… Read More »EUR/USD Analysis: Traders seem non-committed amid Ukraine crisis, ahead of FOMC

Fed to kickstart policy normalization with a 25 bps hike in March. Gold has been suffering heavy losses this week amid surging US T-bond yields. XAU/USD is likely to remain under bearish pressure unless Fed adopts a dovish policy outlook. Gold came under strong selling pressure at the start of the week and erased the majority of the gains it registered since the beginning of the Russia-Ukraine war. Heightened optimism for a peace agreement and rising US Treasury bond yields ahead of the US Federal Reserve’s policy announcements have weighed heavily on the yellow metal, dragging it to its lowest level in more than ten days. The Fed is widely expected to hike its policy rate by 25 basis points at the March policy meeting. Markets have been pricing that move since the beginning of the year. Hence, the Fed’s rate outlook, which will be revealed in the updated Summary of Economic Projections, and Chairman Jerome Powell’s tone on war-related uncertainty should be the thing that triggers a significant market reaction. December’s dot plot revealed that the Fed was expecting the Core Personal Consumption Expenditures (PCE) price index to average 2.7% in 2022, up from 2.3% in the previous forecast.… Read More »Fed March Preview: Gold needs a dovish Fed to regain traction