The foreign exchange (forex) market is a constantly evolving landscape heavily influenced by global economic and political events. Therefore, as a forex trader, staying current with the latest events and data releases that can impact the market is essential. In this article, we will examine some of the key developments during the third week of April 2023 and their potential impact on the forex market.
Although the third week of April saw a relatively quiet period in the global financial markets, there were still a few noteworthy updates worth considering.
1. The Fed Next Meeting
According to Forbes, investors expected the US Federal Reserve to raise the interest rate once more and possibly the final hike in the upcoming meeting in May. The Federal Open Market Committee (FOMC), or the official body responsible for making monetary policy and setting interest rates, is set to meet from the 2nd to the 3rd of May.
The FOMC is anticipated to implement its third quarter-point rate hike in a row. The FOMC has been pursuing this strategy for a year in an effort to stabilize inflation without causing a recession in the US economy. This upcoming rate increase would mark the 10th time the Fed has raised rates since March 2022.
It is still fresh in our mind that in March, Silicon Valley Bank experienced a significant financial failure that posed a risk of causing a wider banking crisis. However, despite the concern, the situation did not escalate to a full-blown banking crisis. Nevertheless, the incident has led to a tightening of credit market conditions in the United States, which could potentially help the Federal Reserve (Fed) in its efforts to reduce inflation.
The bond market is predicting an 86% probability of the Federal Reserve raising interest rates by a quarter of a percentage point, which is equivalent to 25 basis points, at the next policy meeting. If this happens, it will bring the federal funds target rate to a range of between 5.0% and 5.25%. This increase would be consistent with the Federal Open Market Committee’s (FOMC) current forecast for the peak in interest rates. Therefore, it is possible that a rate hike in May could mark the end of the Fed’s current cycle of interest rate increases.
2. The CPI (Inflation) in the UK, Canada, and New Zealand
The essential data released last week concerned CPI (inflation) in the UK, Canada, and New Zealand, following US inflation’s strong fall the previous week.
As reported by Daily Forex, In the UK, the inflation rate decreased by 0.3% from February to March 2023, but this decline was not as significant as many analysts had anticipated. Specifically, the inflation rate was 10.1% in March 2023, compared to a forecasted rate below 10%. As a result of this, the Bank of England is likely to adopt a more hawkish approach. A hawkish approach means that the Bank of England will likely take a more aggressive stance on managing inflation, possibly by raising interest rates to slow down economic activity and reduce inflationary pressure.
On the other hand, in New Zealand, based on BabyPips, the CPI increased by 1.2% on a quarterly basis, which was lower than the forecasted increase of 1.6%. This was due to softer fuel prices. However, the prices of critical goods such as food, housing, and utilities remain high.
The news presented on Prime Codex is solely those of the analysts quoted. They do not represent the opinions of Prime Codex on whether to buy, sell or hold specific pairs. Traders are advised to conduct their independent research before making an investment decision.