Fed uncertainty leads to low dollar fluctuations, Bank of England finale "super central bank week"

Asian Market Review

On Wednesday, the US dollar index surged and fell, falling rapidly after the Fed's interest rate resolution was announced, erasing most of the intraday gains. As of now, the US dollar is quoted at 103.46.

Keep interest rates unchanged between 4.25% and 4.5%, slowing down the reduction of Treasury bonds to US$5 billion, MBS remains unchanged, Waller tends to maintain the original speed and vote against it.

Sharply lowered the forecast for economic growth this year by 0.4 percentage points and raised inflation expectations.

Dotmap: The forecast of interest rate cuts of two times will be maintained in the next two years, but fewer dovish officials will be inclined to become dovish.

Powell - repeatedly stressed uncertainty and reiterated that he was not in a hurry to adjust his position. He said that he was currently in a state of interest rate cuts and limits, and short-term inflation expectations rose, and remained stable for a long time. If the recent avatradescn.commodity inflation data continues to be strong, it will definitely be related to tariffs.

The Israeli army has carried out "targeted ground operations" in the central and southern Gaza Strip.

The Israeli army claimed to kill two high-level Hamas leaders.

Israeli air strikes a United Nations agency in the central Gaza Strip, injured at least five people.

Foreign media: TrumpThe letter sets a two-month deadline for Iran to reach a nuclear agreement.

Russia said that it is not ruled out that Putin and Trump meet in Saudi Arabia.

The Trump-Zelensky call lasted about an hour.

Zelensky: Accepting the US proposal to stop attacks on energy and civil infrastructure and an unconditional ceasefire on the front line, the Ukrainian team will continue to coordinate the "peace steps" in Saudi Arabia.

Kremlin: After Putin and Trump spoke Mandarin, they have taken action to stop their attacks on Ukraine's energy infrastructure plan; ⑤ Russia and Ukraine exchanged captured personnel in the form of "175 to 175".

The Bank of Japan kept interest rates unchanged as scheduled. Governor Kazuo Ueda said that the pace of interest rate hikes depends on the data, and the possibility of reconsidering the 2% inflation target is not ruled out.

The EU plans to cut steel imports by 15% from April 1 to prevent cheap steel from pouring into European markets after the United States imposes new tariffs.

Erdogan's main political enemy was arrested, Türkiye staged a three-time stock and bond exchange rate, with the stock index falling 8.7%. Turkish banks are reported to have sold about US$8 billion to support the Turkish lira.

Summary of institutional views

Berenberg Bank analyst Andrew Wishart: The Bank of England may end a rate cut soon

As the UK inflation may rebound, the Bank of England may be close to ending its rate cut. The market generally expects the Bank of England to keep interest rates unchanged at 4.50% on Thursday, maintaining a gradual pace of interest rate cuts. Wishart said UK businesses are expected to face a substantial increase in costs as minimum wage and employers’ national insurance contributions will increase starting in April, which may be reflected in price increases. "We think the last window for a rate cut this year will be May 8," he said, when bank interest rates will drop to 4.25%.

HSBC: Investors show "extreme enthusiasm" for the yen

HSBC's global foreign exchange research team said in a research report that Investors show "extraordinary enthusiasm" for the yen. The team pointed out that CFTC non-commercial holding data shows that the total number of long yen futures contracts has soared to unprecedented levels recently. The HSBC study cited several key reasons for the recent market optimism, such as the Bank of Japan's interest rate hike cycle that looks more sustainable, and the yen appears to be a more reliable haven than the dollar amid concerns about weak U.S. economy. HSBC recently lowered its dollar-to-Japanese yen forecast from 154 in the first quarter to 145, from 156 in the second quarter to 148, from 158 in the third quarter to 150, and from 160 in the fourth quarter to 154.

Gary Brode, founder of DeepKnowledgeInvesting: The Federal Reserve's forecast for 2025 will turn negative in full, but the market will rise

The Federal Reserve's economic forecast for 2025 has changed in a negative direction: GDP growth forecast is2.1% dropped to 1.7% (if this is due to a decrease in wasteful spending, it will reduce GDP but will also bring net benefits to the economy). The unemployment rate forecast rose from 4.3% to 4.4% (again, if this is due to reduced government redundancy, it will increase the unemployment rate, but is a net benefit to the economy). PCE forecasts rise from 2.5% to 2.7% (this may be due to the expected potential tariffs that could lead to price increases. The recession may reduce inflation in personal consumption expenditure, which is not a positive factor for the market). Core PCE forecasts rose from 2.5% to 2.8%.

Therefore, the Federal Reserve expects GDP growth to decline, unemployment rate to rise, inflation to rise, and interest rate cuts may decrease. In my opinion, this is not optimistic, but the market index is rising. I suspect that the market expects the Fed to cut more interest rates due to lower economic forecasts (focus on high unemployment and low GDP forecasts, ignore high inflation forecasts).

avatradescn.commerzbank: Whether the Fed's inflation forecast is correct depends on the indicator

Feder Chairman Powell believes that hard data is still stable overall. The weakening of "soft" data such as consumer confidence has not yet had an impact. Powell repeatedly stressed the current high uncertainty in his speech, which is also due to changes in economic policy formulation or announcement by the U.S. government, such as tariffs. It is unclear how this will affect the economy.

According to Powell, the 2025 inflation forecast is at least partly due to higher tariffs, although it is difficult to make an accurate analysis in this regard. Overall, the Fed's basic idea is that the impact of tariffs on inflation is temporary. However, whether this is correct depends largely on whether long-term inflation expectations can remain stable. Despite the increase in some survey-based inflation expectations indicators, most indicators—especially those based on financial markets—stand towards stable expectations.

Because of the high degree of uncertainty, patience is obviously the most important thing for the Fed. Powell hopes that the situation will become more "bright" before the Fed changes its key interest rates. This may happen once the U.S. government makes a critical decision. Powell also reiterated his earlier statement that the Fed is “not in a hurry” to change interest rates. Overall, we believe that the forecast that the Fed will only cut interest rates by 25 basis points by the end of the year is correct, and further interest rates are expected to be cut in early 2026.

The above content is all about "[Ava Aihua Official Website]: The uncertainty of the Federal Reserve has caused the US dollar to fluctuate at a low level, and the Bank of England's finale "Super Central Bank Week" was carefully avatradescn.compiled and edited by the Avatrade foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!

In fact, responsibility is not helpless, it is not boring, it is as gorgeous as a rainbow. It is this colorful responsibility that has created a better life for us today. I will try my best to organize the article.