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.
XAUUSD 22-03-2018 Intra-day analysis
XAUUSD (1329.90): Gold prices broke out to the upside with price closing above the 1328 handle. The near term declines could be seen supported with a retest of 1328 level. As long as this level holds, gold prices could be seen pushing higher, potentially targeting the 1357 level as the next upside target. To the downside, in the event that 1328 fails to hold as support, we expect gold prices to settle back into the range trading within the 1328 and 1307 levels in the near term.