Forex Today: Market mood remains upbeat ahead of all-important Fed rate decision

Eren Sengezer FXStreet

Here is what you need to know on Wednesday, March 16:

Risk flows dominate the financial markets early Wednesday as investors remain hopeful for a diplomatic solution to the Russia-Ukraine crisis and the greenback stays on the back foot. February Retail Sales and Import Price Index data will be featured in the US economic docket ahead of the Federal Reserve's all-important interest rate decision. Consumer Price Index (CPI) data from Canada will be looked upon for fresh impetus as well. Additionally, negotiations between Russian and Ukrainian representatives are set to continue on Wednesday.

US Retail Sales Preview: Relentless shopper may provide dollar-selling opportunity ahead of the Fed.

Russian President Vladimir Putin said on Tuesday that Kyiv was not serious about finding a mutually acceptable solution to the conflict. Although this headline caused investors to turn cautious during the American trading hours, Wall Street's main indexes managed to post decisive daily gains. Mykhailo Podoliyak, one of the Ukrainian representatives, said that there certainly was room for a compromise. Moreover, Ukrainian President Volodymyr Zelenskyy noted in a video statement that negotiations were already sounding more realistic.

Reflecting the risk-positive market atmosphere, China's Shanghai Composite Index gained more than 3% and Japan's Nikkei 225 Index rose 1.6%. In the early European session, US stock index futures are up between 0.3% and 0.8%.

Later in the day, the Fed is widely expected to hike its policy rate by 25 basis points. Investors will pay close attention to the updated Summary of Economic Projections and FOMC Chairman Jerome Powell's comments on the policy outlook.

Fed Interest Rate Decision Preview: Is history a guide?

EUR/USD failed to hold above 1.1000 on Tuesday and ended up closing the day virtually unchanged at 1.0950. The pair stays relatively quiet below 1.1000 early Wednesday.

GBP/USD closed the second straight day in positive territory on Tuesday despite losing its bullish momentum near 1.3100. The pair is moving sideways near the mid-1.3000s in the early European morning.

After losing nearly 2% on Monday, gold fell 1.5% on Tuesday and touched its lowest level in two weeks below $1,910. XAU/USD is consolidating its losses above $1,910 as US Treasury bond yields move sideways.

USD/JPY clings to weekly gains above 118.00 as the JPY struggles to find demand as a safe haven. Kyodo news agency reported earlier in the day that the Japanese government was considering compiling a fresh economic package amid the Russia-Ukraine crisis.

Bitcoin spiked to a six-day high above $41,700 earlier in the day but returned below $40,000. Ethereum is edging higher after posting gains in the previous two days and was last seen rising 1% on the day above $2,600.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD climbs to four-day highs near 1.3250

GBP/USD rapidly reverses Friday’s small losses and challenges the 1.3250 level, or four-day tops, at the beginning of the week. Cable’s upside comes on the back of further loss of momentum in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD extends the advance past 1.1400

EUR/USD starts the week on a positive note, trading above 1.1400 on Monday as broad-based US Dollar weakness lends support to the pair. In the meantime, investors continue to monitor developments surrounding efforts to end the US-Iran conflict, while attention gradually shifts to the ECB's annual forum and the US NFP data.

Gold falters just ahead of $4,100

Gold remains under modest bearish pressure just above the key $4,000 mark per troy ounce on Monday. The yellow metal struggles to extend its recent gains as renewed effervescence in the Middle East revives inflation concerns and bolsters Fed rate hike expectations.

Bitcoin four-year cycle: BTC risks 75% drawdown with four months of bear market still ahead

Bitcoin price continues to trend downward below the $60,000 support zone after losing over 50% of its value since the $126,199 high in October. Bitcoin’s four-year cycle, measured from cycle tops to bottoms, suggests that four months of a bear market are still ahead.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.