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20 Mar 2024

The Trade Academy Team

08:00 CET - 3 min read

Wednesday Morning Coffee - Markets Update - 20 Mar 2024 - Markets Brace for Fed Decision; Yen Weakens Toward 152 Level

Markets Update: Fed in Focus: Global Markets on Edge as Rate Hike Bets Intensify, Yen Tumbles to Four-Month Low


by TradingView

Global Markets Roundup: 20 Mar 2024

Asian markets displayed a mixed sentiment on Wednesday, as investors treaded cautiously ahead of the Federal Reserve's anticipated announcement later in the day. The yen, on the other hand, continued its descent, reaching four-month lows amidst expectations of prolonged accommodative policies in Japan.

European markets are poised for a lower open, with EURO STOXX 50 futures down 0.4% and FTSE futures slipping by 0.1%. Similarly, U.S. futures were marginally down, reflecting the prevailing sense of apprehension among investors. Although Tokyo's Nikkei 225 remained closed for a holiday, the weakness in the yen propelled Nikkei futures 0.4% higher. This movement follows the Bank of Japan's recent decision to terminate years of negative interest rates, a move that was well-anticipated by the market.

In the broader APAC region, the MSCI's index of Asia-Pacific shares outside Japan witnessed a modest uptick of 0.1%. Taiwanese shares experienced a marginal decline of 0.6%, while South Korean shares surged by 1.2%, buoyed by a remarkable 5.6% upswing in Samsung Electronics. Nvidia's announcement regarding the qualification of high bandwidth memory (HBM) chips from a South Korean chipmaker contributed to the positive sentiment in the region. Chinese markets also saw slight gains, with the Shanghai Composite index rising by 0.5%, and Hong Kong's Hang Seng index inching 0.2% higher. The People's Bank of China maintained its benchmark lending rates unchanged, in line with market expectations.

In the currency markets, the Japanese yen, USDJPY, experienced a decline, hitting a four-month low at 151.58 per dollar, and ultimately settling at 151.56, marking a 0.47% decrease. Investors observed with concern as the yen edged closer to its multi-decade low of 151.94, prompting speculation about potential intervention by Japanese authorities.

The yen's depreciation was not limited to the dollar; it also weakened against other major currencies. Notably, it reached 164.66 against the euro, EURJPY, marking its lowest level since 2008. Similarly, against the pound, GBPJPY dropped to 192.75, its weakest performance since 2015. It's worth noting that Japanese markets remained closed on Wednesday due to a national holiday. Meanwhile, the dollar index, DXY, which gauges the strength of the U.S. dollar against a basket of six major currencies, experienced a marginal increase of 0.039%, reaching 103.90. In tandem, the euro, EURUSD, was last traded at $1.0866. Elsewhere in the currency markets, the Australian dollar, AUDUSD, remained relatively stable at $0.6528. Conversely, the New Zealand dollar, NZDUSD, saw a slight decline of 0.18%, reaching $0.6042. This came on the heels of the Reserve Bank of Australia's decision to keep interest rates unchanged, as expected. However, the bank's modification of its tightening stance, indicating a willingness to consider various policy options, injected some uncertainty into the market.

In commodities, oil prices retreated from recent highs amid a strengthened dollar, with Brent crude easing by 0.2% to $87.18 a barrel, and U.S. crude losing 0.3% to $83.21 per barrel. Gold prices remained steady, albeit below the record high reached earlier in the month, closing at $2,157.32 per ounce. Copper futures (HG1!) on the London Metal Exchange (LME) saw a modest increase, gaining 0.2% to reach $8,990 per metric ton. Similarly, aluminum futures (ALI1!) experienced a slight uptick, rising by 0.1% to settle at $2,272 per ton. Zinc futures (CMZN) exhibited a similar trend, climbing by 0.3% to $2,271 per ton. Additionally, lead futures (LEAD1!) showed a moderate increase, advancing by 0.2% to reach $2,094 per ton.

In Soft Commodities, Soybean futures in Chicago experienced a modest rise on Wednesday, as traders adjusted their positions by unwinding short positions. This upward movement, however, was tempered by the ongoing harvest of a substantial crop in Brazil. Meanwhile, wheat prices declined for the first time in three sessions, while corn also saw a decrease. At the Chicago Board of Trade (CBOT), the most-active soybean contract (ZS1!) edged up by 0.1% to reach $11.87 per bushel as of 0323 GMT. Conversely, wheat futures (ZW1!) dipped by 0.4% to $5.50-1/2 per bushel, and corn futures (ZC1!) experienced a 0.2% decline, settling at $4.38-1/2 per bushel. The Arabica coffee futures for May (KCK24) experienced a positive closure, marking a gain of +1.30 (+0.72%). Similarly, ICE Robusta coffee futures (RMK24) also saw an upward trend, closing up by +11 (+0.33%). Conversely, raw sugar futures traded on ICE witnessed a decline of over 2% on Tuesday, attributed to anticipated rains in Brazil coupled with indications of technical weakness. Meanwhile, London cocoa futures stabilized following a surge to record levels, with investors capitalizing on profit-taking opportunities.

Looking ahead, all eyes are on the outcome of the Federal Reserve's policy meeting, with expectations that the new economic projections could signal a slower pace of interest rate cuts than previously anticipated. Any hawkish signals from Fed Chair Jerome Powell could bolster the U.S. dollar further. Furthermore, European Central Bank officials, including Christine Lagarde, are scheduled to speak later in the day, with some endorsing June as a likely time frame to initiate discussions on ECB rate cuts.

Today, economic observers are poised for a series of significant events and announcements that could shape global markets. Notable among these are the release of the UK Consumer Price Index (CPI), which offers insights into inflationary trends in one of the world's leading economies. Additionally, market participants will be closely monitoring the Eurozone Consumer Confidence Index, gauging sentiment among consumers in the Euro area.

On the Asia-Pacific front, attention will be directed towards Australia's Purchasing Managers' Index (PMI), providing crucial indicators of the country's manufacturing and services sectors. These figures often serve as barometers for broader economic health.

Meanwhile, eyes will be on the Federal Open Market Committee (FOMC) in the United States, as it convenes to discuss monetary policy decisions. Given the FOMC's influential role in setting US interest rates, any announcements or statements made during this meeting are likely to reverberate across global financial markets.

Furthermore, central banks around the world are scheduled to make policy announcements, including the Czech National Bank (CNB) and the Central Bank of Brazil (BCB). These decisions will be closely scrutinized for their potential impact on currency valuations and investor sentiment.

Adding to the mix are the release of minutes from the Bank of Canada (BoC), offering deeper insights into the deliberations of Canadian policymakers. Alongside this, remarks from Federal Reserve Chair Jerome Powell are anticipated, with investors eager to glean clues about the future direction of US monetary policy.

Additionally, speeches from key figures such as European Central Bank (ECB) President Christine Lagarde, and ECB officials Luis de Cos, Philip Lane, and Isabel Schnabel are expected. Their commentary could provide valuable insights into the ECB's stance on economic recovery and policy outlook. Finally, attention will also be on supply dynamics from Germany, a crucial player in the global economy. Any developments in German supply chains or production trends could have implications for broader economic activity.

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General news - Information source from multiple newswires.

The article and the data is for general information use only, not advice!

The Trade Academy Team

Rating: Mixed Outlook

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