Markets brace for volatility surge on Fed rate decision and Powell presser

Financial markets stay quiet mid-week as investors step aside while preparing for the US Federal Reserve’s (Fed) policy announcements and Chairman Jerome Powell’s press conference. Ahead of this event, several European Central Bank (ECB) policymakers, including President Christine Lagarde, are scheduled to deliver speeches. Weekly Mortgage Applications and EIA Crude Oil Stock Change will be the only data featured in the US economic docket.

The Fed is widely expected to raise its policy rate by 25 basis points to the range of 4.75%-5% following its March policy meeting. The revised Summary of Projections (SEP) will also be published alongside the policy statement at 1800 GMT. Half an hour later, Powell will deliver his prepared remarks and respond to questions from the press. The terminal rate projection in the SEP and Powell’s approach to the market turmoil that was triggered by the collapse of Silicon Valley Bank will likely impact the risk perception in a significant way in the second half of the day.

In the early European session, the US Dollar Index continues to fluctuate in a tight range above 103.00 and the 10-year US T-bond yield consolidates its gains above 3.5% following Tuesday 3.5% increase. Reflecting the cautious market stance, US stock index futures trade virtually unchanged.

EUR/USD preserved its bullish momentum and closed the fourth straight trading day in positive territory on Tuesday. The pair holds steady slightly above 1.0750 early Wednesday.

Following a consolidation phase at around 1.2200 in the Asian session on Wednesday, GBP/USD turned north and climbed above 1.2250 in the European morning. The UK’s Office for National Statistics reported that annual inflation in the UK, as measured by the Consumer Price Index (CPI), jumped to 10.4% in February from 10.1% in January. This reading surpassed the market expectation of 9.8% and provided a boost to Pound Sterling ahead of the Bank of England’s (BOE) policy announcements on Thursday.

USD/JPY registered strong daily gains on the back of rising US T-bond yields on Tuesday. The pair trades in a tight range at around 132.50 in the European morning.

Following the rejection from the $2,000 area at the beginning of the week, Gold price extended its downward correction on Tuesday and broke below $1,940. XAU/USD holds steady near $1,940 early Wednesday.

Bitcoin registered small daily gains on Tuesday and continues to in a tight range above $28,000 early Wednesday. After having lost nearly 3% on Monday, Ethereum regained its traction and rose nearly 4% on Tuesday. ETH/USD fluctuates in a tight channel at around $1,800 in the early European session.

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