GBP/USD fell around 0.7% on Wednesday, sliding below the 1.3300 handle as Cable continues to grapple with the technical level. The sell-off extends the pullback from the late-January high near 1.3870, with the pair now trading below both of its key daily moving averages. Wednesday’s decisive bearish candle suggests the indecisive price action of the past two weeks has resolved to the downside.
United States Net Long-Term TIC Flows below forecasts ($71.6B) in January: Actual ($15.5B)
Gold remains under selling pressure on Wednesday, slipping below the $4,900 mark to hit new six-week lows. The move is driven by a firmer US Dollar following stronger-than-expected inflation data, and as the Fed unveils its latest monetary policy decision.
Federal Reserve set to keep interest rates steady spike in Oil prices adds fresh inflation risks
The United States (US) Federal Reserve (Fed) announces its interest rate decision on Wednesday, a pivotal meeting for markets to gauge the stance of the world’s most important central bank after an energy shock that could put the Fed’s dual mandate in tension. While the main decision on interest rates is a given, the surge in Oil prices after the Iran war adds a layer of uncertainty that could turn this meeting into much more interesting – and more volatile for markets – than initially expected.
Markets widely expect the Federal Open Market Committee (FOMC) to keep the policy rate unchanged in the range of 3.5%-3.75% for the second consecutive meeting.
As this decision is nearly fully priced in, the Summary of Economic Projections (SEP) and Fed Chair Jerome Powell’s comments in the post-meeting press conference could impact the US Dollar’s (USD) performance.
The CME FedWatch Tool shows that investors see virtually no chance of a rate cut in either March or April, while pricing in more than 75% probability of another policy hold in June. Actually, markets currently expect only one interest-rate cut this year, a big change compared to the three cuts anticipated before the breakout of the war in Iran.
What changed? The Fed will be conducting its meeting under extraordinary circumstances as rising crude Oil prices, due to the closure of the Strait of Hormuz amid the ongoing war between the United States (US) and Iran, heighten the uncertainty surrounding the inflation outlook.
DBS Group economist Philip Wee argues that the Fed enters its March 17-18 meeting caught between surging energy-driven inflation and weakening US growth.
“Fed Chair Jerome Powell may still be haunted by the “behind the curve” spectre of 2022, when a delayed response to surging prices forced a painful, aggressive hiking cycle,” Wee notes. This time, however, the Fed is currently confronting a fragile economy, he adds, citing the downward revision to the fourth-quarter Gross Domestic Product (GDP) growth and the 92,000 contraction recorded in Nonfarm Payrolls (NFP) in February.
“The FOMC must determine whether these energy price spikes represent a primary inflationary threat requiring higher rates or a consumer tax necessitating cuts,” Wee concludes.
When will the Fed announce its interest rate decision and how could it affect EUR/USD?
The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement, alongside the SEP, at 18:00 GMT. This will be followed by Fed Chair Jerome Powell’s press conference starting at 18:30 GMT.
The rate decision itself is unlikely to trigger a significant market reaction, but investors will scrutinize the SEP and Fed Chair Powell’s tone.
The latest SEP, published in December, showed that the central bank’s projections implied a 25-basis-point (bps) rate cut in 2026, and another 25 bps reduction in 2027.
Additionally, Fed policymakers’ end-2026 projection for PCE inflation came down to 2.4% from 2.6% in September’s SEP. Given the recent rise in Oil prices, Fed officials are likely to point to higher inflation ahead.
The CME FedWatch Tool points to about a 30% chance that the policy rate will remain unchanged at the range of 3.5%-3.75% at the end of the year. In case the dot plot highlights that a majority of policymakers prefer to hold the policy steady for the rest of 2026, in addition to an upward revision to the end-2026 PCE inflation projection, the USD could gather strength with the immediate reaction and weigh heavily on EUR/USD.
Conversely, the USD could come under bearish pressure and allow EUR/USD to gain traction if the SEP points to at least one 25 bps reduction in rates this year.
Once markets digest the policy statement and the SEP, they will shift their focus to Powell’s presser, which will likely focus on fears about reviving inflation and his future at the Fed.
If Powell hints that they will have to prioritize controlling inflation and inflation expectations because of rising Oil prices, this could reaffirm expectations for a steady policy rate for longer and support the USD. On the other hand, the USD is likely to lose interest in case Powell doesn’t hit the panic button, noting that they will need more time to assess how the US-Iran conflict could influence inflation dynamics and that they will need to be more attentive to labor market conditions and support growth after seeing the sharp decline in February’s NFP.
“Powell will carefully avoid giving any strong forward-looking signals and emphasize the two-sided nature of the risks stemming from the energy supply shock,” said Danske Bank Research Team.
“Most FOMC participants still see the current policy rate level somewhat above neutral, and once the energy uncertainty eases, we expect the Fed to eventually deliver two more rate cuts in June and September,” they add. “Extending uncertainty could push the expected cuts further out into the future but not erase them completely, which we expect to be reflected also in the updated dots,” the analysts conclude.
Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:
“The near-term technical outlook points to a buildup in bearish pressure. The 20-day Simple Moving Average completed a bearish cross with the 50-day SMA and recently dropped below the 100-day and 200-day SMAs. Additionally, the Relative Strength Index (RSI) indicator stays below 40 after recovering slightly from the oversold region below 30.”
“On the downside, 1.1380 (Fibonacci 38.2% retracement level of the 2025-2026 uptrend) aligns as a key support level ahead of 1.1170 (Fibonacci 50% retracement). In case EUR/USD reaches the 1.1660-1.1700 region, where the Fibonacci 23.6% retracement, the 100-day SMA and the 200-day SMA form a strong resistance, technical buyers could take action. In this scenario, 1.1900 (round level, static level) could be seen as the next technical hurdle.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
South Africa Retail Sales (YoY) came in at 4.2%, above forecasts (2.5%) in January
Gold extends its sideways consolidative price move around the $5,000 psychological mark in Wednesday’s European session as traders seem hesitant ahead of the crucial FOMC decision. The US Federal Reserve is widely expected to maintain the status quo and keep interest rates steady at the end of a two-day meeting. The market focus, however, will be on the accompanying policy statement and updated economic projections, including the so-called dot plot.
AUD: RBA hike underscores domestic inflation risks – MUFG
MUFG’s Senior Currency Analyst Michael Wan highlights that global and Asian rates have repriced since the Iran war, with the Reserve Bank of Australia’s 25 bps hike illustrating how domestic inflation and macro conditions drive policy paths. He notes markets initially saw a narrow 5–4 decision, but Governor Bullock’s comments were interpreted as hawkish, suggesting further tightening remains on the table.
RBA repricing reflects inflation starting point
“The broader picture we find ourselves in is that rates markets have repriced across global and Asian central banks since the Iran war, and perhaps for good reasons.”
“Yesterday’s decision by the Reserve Bank of Australia to hike rates by 25bps was one good example, and highlights how the starting point of inflation and domestic macro setting is also key to the path moving forward.”
“The decision was initially taken by the market as a split one with a 5-4 vote for a hike, but RBA Governor Bullock’s subsequent press statement seems hawkish suggesting that members were debating “when” rather than “whether” to hike rates during the meeting.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Canadian Dollar holds steady ahead of Fed, BoC policy decisions
USD/CAD remains flat after posting little gains in the previous session, hovering around 1.3690 during the Asian hours on Wednesday. The pair holds steady as traders remain cautious ahead of policy decisions from both the Federal Reserve (Fed) and the Bank of Canada (BoC) later in the day.
Traders are particularly focused on guidance from Fed Chair Jerome Powell regarding how the recent surge in oil prices may influence the central bank’s policy outlook. Markets widely anticipate that the Federal Reserve will keep its benchmark interest rate unchanged within the 3.50%–3.75% range for March, according to the CME FedWatch Tool. Such a move would mark a second consecutive pause, underscoring a cautious approach amid rising economic and geopolitical uncertainty.
On the Canadian side, Rabobank strategists Molly Schwartz and Christian Lawrence expect the BoC to hold its overnight rate at 2.25% at Wednesday’s meeting and maintain that level through year-end, despite persistent inflation and slowing economic activity. This March policy view aligns with the consensus among Bloomberg-surveyed analysts and is already fully priced in by markets. The conflict involving Iran and elevated oil prices are seen adding inflationary pressure that monetary policy may struggle to counter, while markets tentatively price in the possibility of a rate hike.
USD/CAD may remain supported as the Canadian Dollar (CAD) faces pressure from softer oil prices. West Texas Intermediate (WTI) crude has pared recent gains, trading near $94.00 per barrel at the time of writing.
However, oil prices could find renewed support amid escalating tensions around the Strait of Hormuz. The US military reported targeting Iranian coastal sites near the strait due to threats from anti-ship missiles to global shipping, according to Reuters. Meanwhile, the BBC reported that Israel claimed responsibility for strikes that killed senior Iranian officials, including Ali Larijani and Basij chief Gholamreza Soleimani.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
United States API Weekly Crude Oil Stock registered at 6.6M above expectations (-0.6M) in March 13
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Silver Price Forecast: Fed decision could trigger a XAG/USD slump toward $64
XAG/USD Current price: $79.36
- The Middle East war is likely to impact central banks’ decisions.
- Market participants anticipate a hawkish shift by the Federal Reserve.
- XAU/USD pressures immediate support at $77.60, break lower exposes $64.
Silver traders are engaged in what so far seems a lost battle to take XAG/USD back towards record highs. The precious metal is stuck at lower levels, and trading around the $80 mark for a second consecutive day, indifferent to the market’s mood swings.
Sentiment has improved a bit on Tuesday, or at least did not deteriorate further due to the Iran war. Stock markets turned positive after a soft start, and kept demand for the Greenback in check, although Wall Street suffered a setback after an optimistic start. The US Dollar (USD) partially lost the market’s favor in anticipation of the Federal Reserve (Fed) monetary policy announcement on Wednesday, which will include fresh economic projections.
The looming announcement weighs on the Greenback, as market players anticipate a chaotic situation in the Fed’s headquarters: Chair Jerome Powell is on its way out, voting members are split, President Donald Trump longs for much lower interest rates, and soaring oil prices anticipate inflation will run higher, much higher than the Fed’s 2% goal in the upcoming months.
True, the Fed is likely to hold rates unchanged and lean hawkish. In an ideal scenario, that should be bullish for USD. But we are far from an ideal world.
Possible Silver reaction to Fed announcement
Regarding precious metals’ behaviour, market players will assess not only the Fed’s decision on the USD, but also how the market’s sentiment unfolds afterwards. But for Silver, it seems a lose-lose scenario.
An extrinsically hawkish Fed will immediately boost demand for the USD versus major rivals. Also, if the Summary of Economic Projections (SEP) includes upward revisions to inflation prospects, and be sure it will, the Greenback will go up.
Excessively concerned Federal Open Market Commission (FOMC) members could initially trigger demand for Silver and Gold, but beware of quick retracements once the market digests the news.
A split vote will be no surprise and probably be the least concerning part of the event. It’s no news, and something for the upcoming Chairman, Kevin Warsh, to deal with.
The Fed would have to deliver an extremely dovish decision, such as cutting rates, to put significant and sustained pressure on the USD, quite an unlikely scenario.
XAG/USD Technical Outlook
The XAG/USD pair is trading a handful of pips above the 23.6% Fibonacci retracement of the $121.66 – $64.08 decline, with the immediate support level in the $77.60 area. A break below it exposes the February 17 low around $72.00, while below the latter, there’s nothing in the way until the bottom of the range. Resistance, on the other hand, comes at the 38.2% retracement at $86.08, while the next Fibonacci resistance comes at $92.87. As long as Silver remains below the 61.8% retracement just ahead of the $100 psychological mark, the risk will remain skewed to the downside.
Other than that, technical readings in the daily chart show XAG/USD is mildly bearish as price holds below the 20-day Simple Moving Average (SMA) near $84.70 while remaining above the rising 100- and 200-day SMAs. The Momentum indicator aims south below 0 and weakens, indicating fading buying pressure after the recent rebound from the mid-$70s. Finally, the Relative Strength Index (RSI) indicator is around 44 with a downside tilt, reflecting increased selling interest.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Aluminium: Chinese output above cap on price incentives – Commerzbank
Commerzbank’s FX & Commodity Analyst Volkmar Baur reports that Chinese Aluminium production has risen nearly 3% year-on-year and is running above the government’s annualized cap, supported by higher Aluminium prices and redirected Alumina flows as the Strait of Hormuz remains blocked. The bank warns that if Beijing does not raise the cap, smelters will eventually need to scale back output later in the year.
High prices and alumina surplus drive output
“It is expected that Chinese production figures will remain above the 3.75 million-ton threshold in the coming months as well. As long as the Iran conflict persists and renders the Strait of Hormuz impassable, production disruptions in the Gulf region are likely to continue.”
“This has led to a 9% increase in the price of aluminium since the conflict began.”
“In addition, the closure of the Strait of Hormuz is leading to a global oversupply of alumina. Alumina (or aluminium oxide) is primarily used for aluminium production and is imported into the Gulf region as a feedstock for aluminium production.”
“Both rising aluminium prices and a surplus of alumina therefore make it economically lucrative (at least for the moment) for Chinese smelters to produce above the government’s cap. If this cap is not raised, production would have to be scaled back accordingly over the course of the year.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Oil: Price swings ease as conflict risk reassessed – Deutsche Bank
Deutsche Bank analysts note that Brent Oil has stabilised after recent conflict-driven spikes, with prices briefly falling back towards $100 as hopes grew for resumed flows through the Strait of Hormuz. They highlight that International Energy Agency comments on potential stockpile releases and partial resumption at UAE’s Fujairah terminal have helped calm fears of a severe stagflationary shock.
Oil stabilises as supply fears cool
“The sun has shone a little brighter on markets over the last 24 hours, with oil prices stabilising as hopes mounted for a resumption of oil flows through the Strait of Hormuz. So that helped to ease fears about a wider stagflationary shock, with Brent crude (-2.84%) falling back to $100.21/bbl, whilst the 6-month future (-2.64%) fell to $83.40/bbl.”
“But even as there was no obvious sign yet of an off-ramp, we did see oil market pressures that had dominated yesterday’s Asia session ease during European and US hours. One more encouraging headline came from the International Energy Agency, with their Executive Director saying they could release more stockpiles if needed.”
“And while UAE’s Fujairah oil export terminal was hit by an Iranian strike earlier on Monday, it partially resumed operations later in the day. Investors were also pondering the potential for some countries’ vessels to pass through the straits after a few tankers exited the Gulf over the weekend, though this represented only a very small trickle compared to normal volumes of around fifty tankers a day.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)