Daily Market Commentary 21st March 2024

The Fed left rates unchanged and projections of three rate cuts this year remained. The Federal Reserve Chairman Powell answered questions and commented the economy was in a strong position and gave the Fed flexibility on monetary policy. The US Dollar plunged on the news, with the EUR jumping above 1.0900, while the GBP pushed up to 1.2770 despite softer inflation news. The UK inflation number fell more than expected, to 3.4%, from 4%. The tumbling inflation data will probably ensure that the Bank of England will decide to cut rates later in the year. The Bank of England rate decision is likely to emulate the Fed, holding current rates, but with a ‘dovish’ outlook. US equities surged back towards record levels, following the latest news from the Fed, rallying confidence.

The weaker reserve allowed some recovery in the commodity currencies, with the AUD pushing up to 0.6570, while the NZD struggled above 0.6550. The NZD remains under pressure, despite the softer US Dollar, as we look towards the important NZ GDP growth data.