ECB Meeting, US PCE Data, and UK Economic Debates Drive Market Sentiment.

• Euro-Dollar’s recent rebound seems to have plateaued below 1.0890, with short-term momentum indicators suggesting a potential stall.
• Market attention is focused on the upcoming March ECB policy meeting for insights into future central bank policies, particularly regarding growth and inflation projections.
• US Dollar Index shows stability post US PCE data release, with initial jobless claims slightly higher but dollar’s decline restrained near the 200-day moving average.
• Pound Sterling’s trajectory against the Dollar is uncertain, with forecasts ranging from slight appreciation to potential decline by 2024 amidst ongoing UK economic debates.
• Fiscal policies, including potential tax cuts announced by Chancellor Hunt, could influence Bank of England’s rate decisions and Pound’s future direction.

GBP: Forecasts for the Pound against the Dollar vary among currency analysts, with projections ranging from a slight appreciation to a potential decline by the end of 2024. Factors such as ongoing investor interest in carry trades and upcoming UK economic events, including the budget release on March 6th and Bank of England interest rate decisions, will influence the Pound’s trajectory. Analysts highlight the importance of fiscal policies, with Chancellor Hunt expected to announce limited tax cuts that could impact the Bank of England’s rate decisions. MUFG emphasizes that while fiscal stimulus may not significantly alter the UK economy’s performance, it could affect the timing of potential rate adjustments. Amidst these uncertainties, market participants will closely monitor economic indicators and policy announcements for clues about the Pound’s future direction.

EUR: The Euro’s resurgence in February has tapered off, suggesting that its upward movement may be constrained below the 1.0890 mark. Short-term momentum indicators are waning, signaling a potential stall in Euro-Dollar dynamics. All eyes are on the March ECB policy meeting this Thursday, which is anticipated to provide critical insights into the future trajectory of central bank policies. Analysts, including Valentin Marinov, Head of FX Research at Crédit Agricole, maintain a bearish outlook on the EUR from current levels. The focus will be on the ECB’s growth and inflation projections, offering essential clues about the timing and intensity of future rate adjustments. Additionally, any indications from ECB President Christine Lagarde regarding the potential impact of balance sheet policies on rate decisions will be closely monitored.

USD: The US Dollar Index showed marginal weakness following the release of US PCE data, meeting market expectations and indicating stability in inflation levels. Although initial jobless claims were higher than anticipated, the dollar’s decline has been tempered, finding support near the 200-day moving average. Key technical levels, including the 50% Fibonacci retracement and the psychological threshold of 103.00, will be closely watched for potential shifts in dollar dynamics.