Markets correct yet uncertainty remains as investors reassess risk following recent volatility across currencies, commodities and equities. While the USD has slightly retreated from Friday’s gains, its safe-haven appeal remains a key driver amid ongoing geopolitical tensions and an important week for monetary policy.
With interest rate decisions from the Federal Reserve and several other major central banks approaching, traders are closely monitoring developments that could influence market direction in the coming days.
USD retreats Friday’s gains
The USD corrected lower in the FX market yesterday relenting the gains made on Friday. We view the correction as temporary and continue to vie the greenback’s safe haven quality as the key determinant for its direction. We should note though that the Fed’s interest rate decision tomorrow could prove to be a catalyst for the USD’s direction, depending on the decision. Also the trading mix in the FX market could be shaken given that we also get the interest rate decision of BoC on Wednesday and on Thursday BoJ’s, ECB’s and BoE’s decisions.
Xcellence Research Team opinion
As mentioned we expect the correction lower of the USD in the FX market to be temporary and market uncertainty could push the greenback upwards again.
Oil prices are regaining some of yesterday’s losses
Oil prices corrected lower yesterday, yet regained some of the losses during today’s Asian session. The war in Iran is still the main fundamental issue for oil markets and for the time being there seems to be no end in sight. On the contrary the war in Iran, seems to be still on the escalating phase and could stir new market worries for the supply side of the oil market.
Xlence Research Team opinion
We view the correction lower of oil prices yesterday as temporary and we currently expect that a possible escalation of the US war in Iran could push oil prices higher.
RBA hikes rates and Canada’s CPI rates come in lower than expected
Canada’s CPI Rates for February came in lower than what the market expected and combined with the weak Canadian employment market data for the same month, may be adding pressure on BoC to sound more dovish in its interest rate decision on Wednesday. We also note that RBA hiked rates as expected yet the decision was a close call as five members vote in favour of the rate hike, while four voted against. The bank in its forward guidance also may not have sounded hawkish enough to gather support for the Aussie which lost ground at the time of the release.
Xlence Research Team opinion
We tend to have a bearish predisposition for the Loonie ahead of BoC’s interest rate decision tomorrow, while support for the Aussie seems to have been dented on a monetary level.
US equities correct higher
US equities edged higher yesterday especially AI related shares tended to get particular support. At the same time we note a slight improvement of the market sentiment yet we view this improvement as momentary as also the edging higher of US stock markets. Market worries may intensify once again given the ongoing US war in Iran while also the Fed’s interest rate decision tomorrow may prove to be a pivot point for US equities, depending on the tone of the bank’s forward guidance.
Xlence Research Team opinion
Overall we tend to remain bearish for US equities at the current stage both on a technical level and a fundamental level as the downward direction remains active despite the correction higher yesterday.
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