Global FX Market Summary: Fed, ECB, GOLD March 27 ,2024

Dmitry Chernovolov Market Analyst

Divided central banks (hawkish Fed vs. dovish ECB) and key US inflation data this week drive market movement as gold prices eye potential Fed rate cuts.

Central Banks on Opposite Ends: Fed vs. ECB

The US Federal Reserve and the European Central Bank are at odds over interest rates. The Fed is hesitant to cut rates due to recent inflation spikes. There’s internal debate, with some members advocating for a more gradual approach, while others still support the initial plan of three cuts in 2024. In contrast, the ECB seems more inclined to cut rates in June as inflation appears to be nearing their target levels.

US Economic Data Takes Center Stage: PCE Price Index in Focus

The upcoming release of the US Personal Consumption Expenditures (PCE) Price Index on Friday is critical. If inflation comes in higher than expected, it could push back Fed rate cuts and strengthen the US Dollar. Investors are also paying close attention to Fed Governor Waller’s speech today, hoping for any insights into the timing of potential rate cuts.

Gold Gleams on Easing Policy Hopes

The anticipation of Fed rate cuts is buoying gold prices. Lower interest rates make holding gold less expensive, increasing its appeal as an investment. However, the release of the core PCE data is crucial for determining the timing of these cuts and could have a significant impact on the price of gold.

 

Economic Calendar Highlights

High-Impact Economic Releases This Week (March 27th – March 29th, 2024)

Focus on these key releases that could significantly impact financial markets:

March 28th:

  • United States:
    • Core Personal Consumption Expenditures (PCE) Price Index (MoM & YoY): Measures inflation, affecting Fed policy and the USD.
    • Gross Domestic Product (MoM & Annualized): Shows economic growth.
    • Initial Jobless Claims: Indicates labor market health.
    • University of Michigan Consumer Sentiment Index: Consumer confidence indicator.
  • Europe:
    • Gross Domestic Product (QoQ & YoY): Shows economic growth.
    • Unemployment Rate & Unemployment Change: Labor market data.
  • Japan:
    • Tokyo Consumer Price Index (YoY): Inflation in Tokyo.
    • Tokyo CPI ex Food, Energy (YoY): Core inflation measure.

March 29th:

  • United States:
    • Core Personal Consumption Expenditures – Price Index (MoM & YoY): Inflation measure, affecting Fed policy and the USD.
    • Personal Consumption Expenditures – Price Index (MoM & YoY): Inflation gauge for consumer spending.
    • Personal Income (MoM): Measures disposable income.
    • Fed Chair Powell speech: Market awaits guidance on monetary policy.

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