Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Powell eases recession fears, soothes markets
Global markets were more positive overnight, with the Australian and NZ dollars higher, after Federal Reserve chair Jerome Powell announced interest rates would remain on hold and that recession risks for the US were “not high”.
The Fed announced interest rates would stay in the current range of 4.25% to 4.50%; however, the world’s most important central bank also lowered its 2025 growth forecasts from 2.1% to 1.7% and raised 2025 inflation forecasts from 2.5% to 2.7%.
Despite the change in forecasts, markets were mostly cheered by Powell’s commentary, with US shares seeing their best post-Fed gain since July (source: Bloomberg). The S&P 500 gained 1.1%.
The Aussie and kiwi both rebounded from overnight lows with the AUD/USD back near three-month highs and the NZD/USD, boosted by a better December-quarter GDP result this morning, trading to December highs.
The USD/SGD and USD/CNH both moved back to recent lows.
AUD ascends despite mixed signals
Looking forward, the unemployment rate for Australia is released at 11.30am AEDT.
According to our projection, employment increased by more than 60k in February. After a little increase to 4.1% in January, the jobless rate should drop down to 4.0% this time.
AUD/USD is set to record the third positive month after three consecutive monthly declines into the end of 2024.
Next key support for AUD/USD is the 50-day MA support of 0.6326.
GBP/USD at four-month high ahead of BoE
The British pound remained strong overnight ahead of tonight’s Bank of England decision due at 11.00pm AEDT.
The BoE is seen as likely to keep interest rates on hold, with a less-than 2.0% chance of a cut according to Bloomberg data. Financial markets don’t see a rate cut fully priced in until July with this view contributing to the GBP’s recent strength.
Later tomorrow, the UK GfK consumer confidence report will be released. In February, consumer confidence was at -20, precisely where it had been during the preceding five months.
It will be interesting to see whether there is any pass-through of Europe’s fiscal decisions to UK confidence, or whether concerns about weak growth/tariffs/geopolitical noise dominate.
GBP/USD hit new four-month highs overnight, while GBP/SGD is near eight-month highs. GBP/AUD remains near five-year highs.
US dollar lower after Fed
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 March
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.