The Morning Update

Ahead of the Fed's interest rate decision, the USD has strengthened, oil prices have weakened, and both equities and bond yields remain flat as the market awaits clarity. The USD may rebound after today’s FOMC announcement, but no rate cuts are expected. While the market anticipates dovish guidance, we doubt a shift, as inflation and employment remain key concerns. We expect two cuts in 2H25, but today’s dot plot may signal only one. A sustained USD recovery depends on stabilizing US macro sentiment

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News Headlines. Tensions with NATO over the U.S. stance on Ukraine and Trump's trade war threaten the alliance's airpower strategy, with member countries considering backing out of plans to purchase F-35 fighters. Poland and three Baltic states announced plans to withdraw from the 1997 Ottawa Treaty banning anti-personnel mines to enhance defense amid deteriorating security along NATO’s Russian and Belarusian borders. Germany's parliament approved Chancellor Friedrich Merz's debt reform, freeing up billions for Europe's defense amid Russia's war in Ukraine. Merz justified the debt, citing Putin's "war of aggression against Europe." Russia and Ukraine launched air attacks, despite Putin’s claim to stop targeting energy sites. Zelensky said Russia hit hospitals, while Putin told Trump a ceasefire required halting military aid, which Ukraine’s allies rejected. At least 13 people were killed in Gaza air strikes after Israel resumed combat operations. Two civilians died in a drone strike near al-Mawasi. Netanyahu vowed the fighting would intensify, calling it "just the beginning." Turkish police arrested Istanbul’s mayor, a key opposition leader, and several others on corruption and terror charges, marking a dramatic escalation in the crackdown on dissent in Turkey.

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In currency markets. BOJ Governor Ueda kept the interest rate at 0.50% due to economic uncertainties. The BOJ will adjust easing if inflation targets are met and respond quickly to abnormal yield moves. The AUD weakens as traders await the Fed's interest rate decision. Australia’s Treasurer Jim Chalmers criticized Trump's trade policies as "self-defeating." The Fed is expected to hold rates steady, citing inflation and economic uncertainty. The USD has gained against the JPY (0.32%), CNY (0.13%), AUD and NZD (0.50%), ZAR (0.55%) and MXN (0.22%).

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In commodity markets. Oil prices retreated 0.62% this morning as market participant awaits the US interest rate decision while natural gas rose 1.5%. Gold surged to an all-time high following news that Istanbul Mayor Imamoglu, a political rival of Erdogan, was detained on corruption and terrorism charges. In agricultural commodities, Wheat remains stable, Soybeans are up by 0.8%, and Lumber has retraced by 0.83%.

Current level USD Index 103.640 Up 0.38%

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USD/CAD pair is rising from a two-week low, but upside is limited ahead of the FOMC meeting. The Fed is expected to keep rates unchanged, with focus on future rate cuts and Powell’s comments.

Current level USD/CAD 1.4330 Up 0.23%

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EUR/CAD has remained stable over the past three trading sessions, consolidating around the 1.56 level, reflecting a 4.2% gain since the beginning of March.

Current level EUR/CAD 1.5614 Down 0.22%

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EUR/USD drops sharply to below 1.0900 in Wednesday's European session after hitting a five-month high near 1.0955. The US Dollar strengthens ahead of the Fed’s interest rate decision.

Current level EUR/USD 1.0896 Down 0.44%

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GBP/EUR holds steady with the Euro supported by Germany’s €500 billion spending package and improved risk sentiment from hopes of a Russia-Ukraine ceasefire. Putin, however, rejected a broader ceasefire deal.

Current level GBP/EUR 1.1902 (0.8400) Up 0.08%

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GBP/USD struggles to break above 1.3000 ahead of the Fed's policy decision. The Fed is expected to keep rates unchanged. Market attention will be on how inflation and consumer confidence are viewed amid Trump’s policies, as February's core CPI rose by 3.1%, the lowest since April 2021.

Current level GBP/USD 1.2991 Up 0.01%

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