The Federal Reserve has raised interest rates as expected but also indicated the possibility of pausing its rate hike cycle following a banking crash. However, the central bank remains committed to reducing inflation, forecasting at least one more hike this year, and has no plans to cut interest rates in the near future. While US interest rates are approaching their peak in the tightening cycle, further increases and longer-term high rates could put pressure on the economy this year. Foreign capital flows to European and Asian markets are also expected to remain limited, creating concern about a potential economic slowdown.
Dollar Under Pressure as Investors Digest Fed Meeting
The US dollar has fallen below the 102.00 yardsticks for the first time since early February and remains under pressure following the latest Federal Reserve meeting. While diminishing banking concerns are providing some support to the risk complex, the still elevated inflation, resilience of the US economy, and hawkish comments from Fed speakers are expected to limit any potential pivot in the short term.
Major Currencies Appreciate Against the US Dollar
In the wake of the less hawkish Federal Reserve, major currencies are gaining strength against the US dollar. The Euro has been rising over the past week, with bullish MACD signals and an ascending trend line from March 15. However, the horizontal resistance area around 1.0930-35 and the overbought RSI (14) line may present a challenge for the EUR/USD buyers. A successful break of 1.0930 is necessary for the pair to maintain its bullish momentum.
Gold Prices Extend Gains Following Fed Meeting
Gold prices are rising and targeting the $2,000 mark following the Federal Reserve meeting. The drop in US Treasury bond yields and the US Dollar has contributed to this rise. Despite the rejection of "blanket insurance" for deposits by US Treasury Secretary Janet Yellen, concerns about banking turmoil have decreased. This has helped to propel XAU/USD prices to new heights.
The boE rate decision is awaited after Fed’s rate hike
While the Fed delivered a rate hike of 25 basis points (bps), concerns remain about dovish moves in the future. The Rate Statement and dot plot have fueled these worries. This has caused the US Dollar to weaken, even though Fed Chair Powell has ruled out calls for a rate cut in 2023.
Moving forward, gold traders will be paying close attention to the second-tier statistics and monetary policy moves of the Bank of England (BoE) and the Swiss National Bank (SNB). Bullish traders expect more dovish rate hikes amid the looming banking crisis. This will keep the price of gold on the rise as investors anticipate future Fed moves.
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