BoJ holds rates steady, Fed expected to follow suit

Markets await key economic releases today, including Eurozone February inflation data, the US FOMC statement and interest rate decision, followed by Fed Chair Powell’s press conference.

While immediate rate cuts are not expected, investors will scrutinize the Fed’s assessment of inflation risks, particularly in the face of ongoing trade uncertainties. Policymakers may opt for a cautious tone until greater clarity emerges on upcoming tariff measures set to roll out in April.

Currencies

The EUR/USD pair extends its downward trajectory, approaching the 1.0900 threshold during European trading on Wednesday. A resurgence in US Dollar demand, fueled by pre-Federal Reserve positioning, has kept the Euro on the back foot. Market participants are adjusting portfolios in anticipation of the Fed’s policy outcome, which remains the focal point for today’s session.

The Japanese Yen continues to weaken following the Bank of Japan’s (BoJ) decision to maintain its benchmark interest rate at 0.50%. Governor Kazuo Ueda, addressing the press on Wednesday, emphasized the rationale behind keeping the policy stance unchanged. As a result, USD/JPY is up, inching closer to the psychologically significant 150.00 mark.

Commodities

Gold

Gold trading near record highs, experiencing a consolidation phase as investors exercise caution ahead of the Federal Open Market Committee (FOMC) announcement. The Fed is widely expected to leave its policy rate unchanged within the 4.25%–4.50% range, shifting attention to its updated economic projections, including the dot plot. Fed Chair Jerome Powell’s remarks post-meeting will be crucial in shaping market expectations regarding the future rate trajectory.

Crude Oil

Oil prices remain under pressure for the second consecutive day, with West Texas Intermediate (WTI) trading near $66.50 per barrel during Asian market hours. The downside pressure is linked to expectations of increased Russian crude output. Meanwhile, geopolitical tensions persist, with escalating conflict in the Middle East raising concerns over potential disruptions in key oil-producing regions.

Additionally, the latest API data showed a significant weekly build in US crude inventories, with stockpiles rising by 4.593 million barrels. However, market sentiment saw some relief after reports that former US President Donald Trump and Russian President Vladimir Putin had agreed to pause military strikes on critical energy infrastructure in Ukraine.