FOMC Economic Projections Signal Three Fed Rate Cuts

On Wednesday, the FOMC left interest rates at 5.50%. Moreover, the FOMC projected a 2024 median Fed Funds Rate of 4.6%, unchanged from December. The FFR projection signaled three Fed rate cuts in 2024, driving demand for riskier assets. An upward revision to 2024 growth was also market-friendly.

Fed Chair Powell avoided spooking the markets, saying the Fed will likely cut rates later in the year.

On Wednesday, the Dow and the Nasdaq Composite saw gains of 1.25% and 1.03%, respectively. The S&P 500 advanced by 0.89%.

The Wednesday Market Movers

BASF led the way on Wednesday, rallying 2.53% on a stock upgrade from hold to buy.

However, auto and bank stocks had a mixed mid-week session in anticipation of the Fed policy decision and projections.

Commerzbank gained 0.12%, while Deutsche Bank declined by 0.71%. Bank stocks faced scrutiny after news hit the wires of the US investigating Raiffeisen over plans to acquire a stake in a construction group under the control of sanctioned Russian Oleg Deripaska.

Porsche and Volkswagen saw gains of 0.66% and 0.22%, respectively. However, BMW and Mercedes Benz Group declined by 0.71% and 0.47%, respectively.

Private Sector PMIs, the Economic Bulletin, and the ECB in Focus

On Thursday, preliminary private sector PMIs for Germany and the Eurozone warrant investor attention. A less marked contraction across the German and euro area private sector could drive demand for DAX-listed stocks.

Economists forecast the German manufacturing PMI to increase from 42.5 to 43.1 in March. Moreover, economists predict the services PMI to rise from 48.3 to 48.8.

Forecasts for the Eurozone paint a rosier picture of the euro area economy. Economists expect the manufacturing PMI to increase from 46.5 to 47.0 and the services PMI from 50.2 to 50.5.

However, investors must consider the sub-components, including prices that may influence bets on a June rate cut.

Beyond the numbers, the ECB Economic Bulletin and commentary also need consideration.

US Economic Calendar: Private Sector PMIs and Jobless Claims in the Spotlight

Later in the Thursday session, jobless claims and private sector PMIs also warrant investor attention.

A pickup in US service sector activity and tighter labor market conditions could test bets on a June Fed rate cut.

Economists forecast the US Services PMI to fall from 52.3 to 52.0 and the Manufacturing PMI to decline from 52.2 to 51.7. Moreover, economists expect initial jobless claims to increase from 209k to 215k in the week ending Mar 16.

Other stats include Philly Fed Manufacturing and existing home sales. A larger-than-expected fall in the Philly Fed would garner investor interest. Economists forecast the Philly Fed to fall from 5.2 to -2.3 in Mar.

Beyond the numbers, investors must consider FOMC member commentary. FOMC member Michael Barr is on the calendar to speak.

Short-term Forecast

Near-term trends for the DAX will hinge on private sector PMIs from the euro area and the US. A pickup in demand but downward price trends could boost buyer demand or DAX-listed stocks.

In the futures, the DAX and Nasdaq mini were up 173 and 111 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX held well above the 50-day and 200-day EMAs, sending bullish price signals.

A DAX return to the Mar 20 all-time high of 18,045 would support a move toward the 18,200 level.

Private sector PMIs and central bank commentary need investor consideration.

Conversely, a fall through the 18,000 handle could give the bears a run at the 17,850 handle.

The 14-day RSI at 77.00 shows the DAX in overbought territory. Selling pressure may intensify at the Mar 20 high of 18,045.

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• PBOC Deputy Governor expects around 8% nominal economic growth for China in 2024
• China’s State Planner Vice Chairman flags 6 trln yuan available for government investment
• People’s Bank of China dep gov says still more monetary policy room
• Bank of Japan Governor Ueda says massive stimulus had negative side effects
• Swiss National Bank policy decision due Thursday, 21 March 2024 – preview
• China’s focus on the supply side to drive economic growth is creating problems in Europe
• PBOC sets USD/ CNY reference rate for today at 7.0942 (vs. estimate at 7.1792 )
• BoJ Governor Ueda says expects to maintain accommodative monetary policy for time being
• AUD/USD popped on the big beat for Australian February employment data
• Japan finance minister Suzuki says closely watching FX moves with a high sense of urgency
• Japan March preliminary PMIs: Manufacturing 48.2 (prior 47.2) Services 54.9 (prior 52.9)
• Australian February unemployment rate 3.7% (vs. 4.0% expected)
• Japan’s government issues an emergency earthquake warning
• Japan February trade balance -379bn yen (vs. -810bn yen expected)
• Hong Kong’s central bank follows the Fed, leaves base rate unchanged at 5.75%, es expected
• Japan Reuters Tankan for March shows solid improvement for Manufacturing and Services
• Fed ‘insider’ Timiraos says Fed’s outlook has not changed since December: 3 cuts in ’24
• Gold price surging higher in thin trade
• Goldman Sachs have 3 three takeaways from Powell’s press conference
• Australian March preliminary PMIs show manufacturing lower on the month & services higher
• New Zealand Q4 2023 GDP -0.1% q/q (vs. +0.1% expected)
• ICYMI: European Central Bank President Lagarde emphasizes again decisions data dependent
• FOMC June rate cut probability back up to around 70%
• Record closes for the Dow, S&P, and NASDAQ indices
• Forexlive Americas FX news wrap: Dots continue to show 75 bps in cuts this year, risk pops
• Trade ideas thread – Thursday, 21 March, insightful charts, technical analysis, ideas

It
was an active post-FOMC/Powell session in Asia with plenty of news
and data flow, and plenty of FX movement.

We
kicked off with Q4 GDP from New Zealand, with the second consecutive
quarter of contraction for the economy and thus a ‘technical’
recession. A ‘technical’ recession is a recession, commonly
defined as two consecutive quarters of negative economic growth. NZD/USD
dipped a little on the data release but soon bounced back as the US
dollar continued its down draft after the Fed decision. More on the
USD losses to come a little further down in this wrap.

Data
flow from Japan was the next set of notable items. The monthly
Reuters Tankan survey, which serves as a key indicator for the Bank
of Japan’s quarterly Tankan survey, due on April 1, showed that
confidence
at big Japanese companies rebounded to a three-month high in March,
and the service-sector mood rose to a seven-month high.

Japanese
February trade data followed soon after; exports
grew for a third consecutive month on the back of shipments of
vehicles. In
less bright news imports missed expectations. More in the bullets
above.

On
the session USD/JPY fell away, below its US-time lows and to under
150.50 before seeing some sideways movement around 150.40. Later in
the session we had verbal intervention comments from Finance Minister Suzuki and Chief Cabinet Secretary Hayashi. More on these in the
bullets above, along with remarks from Bank of Japan Governor Ueda,
who added some detail to the reasoning behind the Bank’s tightening
move earlier in the week.

From
Australia today was another stunning employment report. The
unemployment rate plunged to 3.7% from the previous month’s 4.1%
(admittedly there was a small drop in participation) with 116K jobs
added. The
78,200 rise
in
full-time employment
was the most in 11 months. The Australian dollar and bond yields
jumped. Further
support for AUD came from an ANZ forecast for iron ore to trade
between USD 90-110/ton for the remainder of 2024.

From
China we saw the People’s Bank of China injecting
the least
amount
of funds through reverse repos in open market operations since August
11, 2023. Later
was a press conference including the PBoC and State Planner (the
National Development and Reform Commission of the People’s Republic
of China (NDRC)). Remarks from PBOC and NDRC officials were
supportive and upbeat on the economy, with a PBOC Deputy Governor
saying he expects around 8% nominal economic growth for China in
2024. Maybe he is overstating expectations because 8% nominal would
be a huge win for China. Oil traders might like to pay attention to
this also, it implies a huge demand for oil this year from China.
Indeed, after dribbling lower the oil price found some stability here
during the session.

Gold
rose. Regional equities rose also, following the strong lead from Wall Street.

As
mentioned earlier the US dollar lost further ground during the day,
adding to its US-time fall.

SEC vs. Ripple: Publicly Available Opening Brief Available Mar 26

According to the latest court briefing schedule, the SEC must file its remedy-related opening brief by Mar 22. The SEC will argue for a punitive penalty to deter breaches of Section 5 of the 1933 Securities Act.

In July 2023, Judge Analisa Torres ruled that Ripple breached Section 5 of the Securities Act for failing to register XRP as a security in sales to institutional investors.

However, the crypto market may have to wait until Mar 26 to access a redacted version of the remedy-related opening brief. On Tuesday, Mar 19, the SEC and Ripple filed a joint sealing proposal. According to the proposal, the SEC must file a public, redacted version of the brief by Mar 26. The SEC and Ripple must meet by Mar 25 to discuss redactions.

Ripple must file its remedy-related opposition brief by Apr 22. If the opposition brief contains confidential or highly confidential information, Ripple will file a public redacted version by Apr 24.

The SEC will file a public redacted version of its reply brief by May 8.