- U.S. stock indices are recovering yesterday’s losses, supported in part by a slightly dovish statement from the Fed. The US500 is up 1.2%, while the US100 is gaining 1.5%. Futures on CBOE Volaitlity Index (VIX) slide almost 6% today .
- The Federal Reserve kept interest rates unchanged as expected but significantly lowered its economic growth forecast for the year to 1.7% from 2.1%. The Fed also raised its projected unemployment rate to 4.4%, while inflation forecasts were revised upward, though the 2% target is still expected to be reached by 2027.
- While the Fed did not change its rate cut projections for this year, still expecting two cuts, it also highlighted significant uncertainty about the future.
- The Fed will slow the pace of balance sheet reduction starting in April, reducing its monthly Treasury runoff from $25 billion to $5 billion, while maintaining the MBS reduction pace at $35 billion per month.
- The decision was received as mildly dovish, despite no changes to rate cut expectations. The EURUSD pair climbed back above 1.0900. However, Powell attempted to neutralize the dovish interpretation, emphasizing that inflation uncertainties remain a challenge.
- Gold surged to historic highs, nearing $3,050 per ounce. While Powell’s remarks were more hawkish than the Fed’s statement, he acknowledged that recent weeks have seen a sharp deterioration in sentiment surveys and an increase in economic risks.
- Eurozone CPI inflation for February was revised down to 2.3% y/y from 2.4%, with January inflation at 2.5%. In the European equity market, defense stocks underperformed, with Rheinmetall (RHM.DE) plunging nearly 5%.
- The Bank of Japan kept interest rates unchanged but softened its rhetoric in response to trade-related uncertainties. Governor Kazuo Ueda indicated that there is no rush for further rate hikes, with June or July seen as potential dates for the next move. While the yen initially weakened, it rebounded against the dollar by the end of the day.
- U.S. crude oil inventories rose by 1.74 million barrels, exceeding the expected 1.0 million barrels but coming in lower than API's reported 4.6 million barrel increase. Crude oil prices rose 0.5% on the day. Natural gas prices also climbed, supported by rolling contract activity and forecasts of colder temperatures in key heating regions.
- Ukrainian President Volodymyr Zelensky acknowledged positive developments regarding agreements to halt attacks on critical energy infrastructure, but expressed skepticism about the prospects of a lasting ceasefire.Zelensky warned that Russia is using the negotiation period to prepare offensives on key frontline positions, reinforcing logistics and supply chains. Washington’s comments on talks with Zelensky were reserved, while Donald Trump described U.S.-Ukraine communication as constructive and hopeful.
- U.S. stock markets are broadly higher today, with the exception of the pharmaceutical and biotechnology sectors. Tech stocks are outperforming, with Nvidia (NVDA.US) up over 3% and Alphabet (GOOGL.US) gaining 2.5% after yesterday’s sell-off. Boeing (BA.US) surged nearly 8%, leading the defense sector higher, after the company’s CFO stated that cash burn has significantly improved this year, estimating the reduction at several hundred million dollars.
Source: xStation5
