Daily Forex Market Preview, 22/03/2018
It was a busy day for the markets with key events lined up that included the UK jobs data, the U.S. Federal Reserve meeting and the RBNZ monetary policy meeting.
Data from the UK showed that the unemployment rate fell to 4.3% on the month beating estimates of an unchanged print of 4.4%. Wage growth surprised to the upside rising 2.8% on the month which beat estimates of 2.6% and accelerating from a revised 2.7% seen previously.
The Federal Reserve hiked the 30-day Fed funds rate to 1.75% as widely expected by the markets. The Fed stuck to its baseline scenario of three rate hikes this year while upgrading its economic assessment. However, the hawkish statement was offset by a dovish press conference chaired by the new Fed Governor Jerome Powell.
The U.S. dollar fell sharply on the day with the biggest gains coming from commodities such as WTI crude oil and gold.
The RBNZ’s meeting was clearly overshadowed by the FOMC meeting. The RBNZ held the overnight cash rate unchanged at 1.75%. The monetary policy statement did not deviate from the previous monetary policy meeting which saw the NZD playing more to the Fed’s narrative than the RBNZ.
Looking ahead, focus turns to the UK as the Bank of England will be holding its monetary policy meeting today. Based on the recent dip in inflation and a pickup in wage growth, expectations ride high for the next BoE rate hike in May. With the recent tides of uncertainty from Brexit abating due to the transitory deal, the Bank of England is expected to push forward with the next rate hike.
The UK retail sales report will be coming up ahead of the BoE meeting. Economists forecast that retail sales increased 0.4% on the month, accelerating from 0.1% previously.
In the Eurozone, flash manufacturing and services PMI data for March will be released.
GBPUSD 22-03-2018 Intra-day analysis
GBPUSD (1.4158): The British pound posted strong gains with early trading today sending the currency pair to a fresh two month high at 1.4170. The gains came amid a better than expected jobs report which saw wages finally catching up as inflation cooled. The GBPUSD breached the trend line which served as resistance and could be seen pushing higher ahead of the Bank of England meeting. The BoE is expected to give a hawkish forward guidance a today’s meeting with the markets now pricing in the next BoE rate hike in the month of May. A near term dips could be seen supported by the trend line which could now act as support.