The only way Federal Reserves will not increase the interest rates is unless three things happen: inflation does not appear, the labor market weakens and U.S.D further slips.
Moreover, the money market also has to cope with the new Covid variant, supply chain disruptions, and Russia’s aggression towards Ukraine.
Plus, there have been recent talks that Federal Reserves might restructure their interest rate hike policy. The mortgage and auto loans have also seen a significant decline in the U.S. Although commercial banks in the U.S. have not increased the interest rates while offering loans to the public.
Then there’s the fear of weak purchasing power in the future is the reason that people have restrained from opting the loans. But, there are also some positive signs such as high investment flow toward the money market and bonds.
The upcoming economic recession is the biggest threat to the financial markets across the globe.
Moreover, the recent U.S. banking sector crisis weakened the U.S. dollar. The current U.S. banking sector crisis is not only an issue for the U.S. economy.
European and Japanese banks also took advantage of expensive government bonds with low yields.
On the flip side, the EMU banks index slipped by 13.4% last week. In addition to that, the KBW index of the U.S. banks tipped by 14.5%.
Conversely, the EUR/USD increased by 0.59%, and GBP/USD also saw a rise of 0.62%. Furthermore, the USD/JPY pair saw a decline in its price by 1.43%.
The Canadian dollar also saw an increase in its price against the USD by 0.08%.
EUR/USD: Buyers Are Waiting For Further Price Drop
Even though Euro gained strength against the U.S. dollar and EUR/USD rose by 0.59%.
But for the past few days, strong bearish trends are piling up on the pair. As a result of the strong bearish trend, buyers are waiting for a decline in the price of EUR/USD.
A large number of bullish investors who purchased stocks at the low point on March 14th were not anticipating the price to go lower than March 8th.
It can be argued that there are individuals who are selling at the low point that was reached on March 14th. However, many bulls are hesitant about buying above March 16th.
The U.S. Federal Reserve’s Meeting is scheduled for March 22nd
Early in the month of March the Federal Reserve’s Chairman in his testimony to congress talked about 50 bps points. It was argued that Fed officials are targeting to increase the policy rate by 5.75%.
But after the SVB crisis and decline in the overall stock market Feds are now restructuring their policy.
Now, there are talks that the Feds have restructured their policy and the new interest rate hike is expected to be 25 bps.
This new policy will further weaken the price of the U.S. dollar. Previously the higher interest rate talks were constantly sending the USD higher against the basket of other currencies.
But most recently, Euro, CAD, JPY, AUD, and NZD all the top currencies have gained momentum against the U.S. dollar.
However, the upcoming Fed meeting that is scheduled for March 22nd will reshape the economic outlook of U.S. markets.
But the previous week there were positive outcomes as the projections show that inflation fears are declining briskly.
The range of the Dollar Index, which was between 103.45 and 105.10 in the middle of last week, will determine the direction of the U.S. dollar in the short term.
The level of 105.00 acts as a barrier preventing further upward movement. On the flip side, the 103.50 level ensures that the price might not go down below that.
As the things stand, the experts are favoring further decline in the U.S. dollar index. As the U.S .dollar is edging for further decline, the British pound, the JPY, and other currencies are expected to go further high.