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Yen & Gold skyrocketed; Eyes on ECB Today

Economic Indicators & Central Banks:

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  • Stock markets in Asia underwent corrections, with US futures and European markets trading cautiously ahead of the European Central Bank (ECB) meeting.
  • Ueda mentioned a gradual increase in the likelihood of meeting targets. Junko Nakagawa, a member of the Bank of Japan (BOJ) board, expressed confidence in Japan’s economy moving steadily towards achieving the central bank’s 2% inflation target sustainably.
  • There are reports suggesting a proposal to remove negative interest rates at the upcoming BOJ policy meeting.
  • The Japanese yen has seen significant gains, marking a departure from its weakening trend over the past two years due to differing interest rate policies.
  • On Wall Street, there was a rebound, and Treasury bonds extended gains following weaker employment data (ADP and JOLTS).
  • During his Humphrey-Hawkins testimony, Chair Powell reiterated the Federal Open Market Committee’s (FOMC) anticipation of rate cuts later in the year. Some concerns were raised about a potential shift towards a more hawkish stance, but Powell emphasized the need for more data to ensure sustained progress toward the 2% inflation target.
  • Renewed concerns over NY Community Bancorp sparked a haven bid. Reports of the bank seeking a cash injection raised fears, reminiscent of Silicon Valley Bank’s collapse in March 2023. NYCB shares plummeted to $2.47, prompting a halt in trading.

Today, the ECB is anticipated to maintain its current stance, with even dovish members seemingly resigned to waiting until June for any rate adjustments. Stubbornly high services inflation and uncertainties surrounding wage negotiations mean rate cuts are not currently under consideration.

ECB Preview: 

The ECB is widely expected to keep policy settings unchanged and continue to stress the data-dependency of future moves at today’s meeting. Even the doves seem resigned to wait until June before cutting rates, but will likely push for Lagarde to keep the door open for a cut in April, just in case the growth outlook deteriorates further. Geopolitical risks mean uncertainty remains high, and the updated staff projections are likely to bring downward revisions to growth and headline inflation projections. That could give the announcement and the presser a dovish tilt. Core inflation though has been slow to follow the headline rate down and services price inflation remains stubbornly high. And with the doves settling for a June cut, hopes of an earlier move are likely to be disappointed.

Market Trends:

  • Stocks largely recovered from earlier selloffs during the week following last week’s all-time highs.
  • The NASDAQ bounced back by 0.58% to 16,031. The S&P500 rose by 0.5% to 5104.76, approaching Friday’s historic peaks of 5137. The Dow advanced by 0.2% to 38,661 but remains below the February 23 peak of 39,135.
  • Target saw significant gains after surpassing earnings expectations, contributing to the rise in the S&P 500, along with strong performances from Nvidia and Meta Platforms.
  • The Nikkei briefly reached a record high but closed lower at 39,598.71.

Financial Markets Performance:

  • The USDIndex remained below 104 at 103.12, reflecting expectations of future rate cuts by the FOMC.
  • The Euro and the Pound held near one-month highs against the dollar, while the Australian and New Zealand dollars climbed to multi-week highs.
  • The Japanese yen surged to a one-month peak against the US dollar amid speculation about the BOJ potentially ending negative interest rates. USDJPY currently stands at 148.08, with the yen also gaining ground against the euro and the pound.
  • Gold continued its upward trajectory for the fifth consecutive day, reaching a new closing high of $2146.48 per ounce. Oil prices rose by 1.25% to $79.13 per barrel.
  • Bitcoin experienced a slight retreat from its recent record high but maintained significant year-to-date gains. Ether slipped after reaching a two-year peak.
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Andria Pichidi
Andria Pichidi
HFM’s Market Analyst
With a passion for financial markets, Andria Pichidi has been a Market Analyst at HFM since 2016, dedicated to empowering clients through insightful daily market reviews and trainings to guide clients in achieving their financial objectives.
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