### United States
The Federal Reserve’s recent projections indicate a slight increase in inflation and a decrease in growth for this year and the next. The median projection, consistent with December’s outlook, anticipates two rate cuts this year. The dovish tone was further supported by the reduction of the balance sheet unwind of Treasury holdings (QT). However, the dispersion of forecasts indicated potential upside risks to inflation, and the possibility of the two rate cuts was more uncertain compared to December. The key message is a high degree of uncertainty. Despite this, the US dollar has been stronger today, showing firmness against all G10 currencies, especially with notable declines from the Antipodean and Scandinavian currencies. Emerging market currencies are generally weaker, except for a few in the Asia Pacific region. Notably, the Turkish lira remains under pressure despite an $8 billion intervention yesterday.
### Eurozone
The euro experienced session lows near $1.0860 prior to the FOMC meeting and, although it rebounded, stalled just below $1.09. Recent European purchasing patterns didn’t manifest today, pushing the euro to trade below yesterday’s lows with the next support level likely around $1.0825-30. Tomorrow, Germany’s Bundesrat is expected to approve a new fiscal initiative, and an EU summit next Thursday will likely address enhancing fiscal space for defense and national infrastructure spending. Nevertheless, Germany and the Netherlands seem to resist a collective bond for defense funding, though there’s interest in collaborative armament purchases, drawing from experiences like the Covid vaccine acquisition.
### United Kingdom
Sterling has recently found support around $1.2950, but this level is showing signs of wearing thin. A marginal new high for the year was made today near $1.3015 before retreating. A break below $1.2940 could lead to a test of the $1.2900 level. The resistance band stretches toward $1.3050, a high seen shortly after the US election. New employment data revealed a slight softening in average weekly earnings, both including bonuses (5.8% vs. 6.1%) and excluding them (steady at 5.9%), while the ILO unemployment measure remained steady at 4.4%. Despite the employment report, the Bank of England is expected to hold rates, with swaps markets anticipating two more cuts this year.
### China
Buoyant stocks, a firm yuan, and 10-year yields approximately 30 basis points above recent lows may prompt Beijing to reassess the prospect of a rate cut, but not immediately. Loan prime rates remained unchanged at 3.10% and 3.60% for the one-year and five-year benchmarks, respectively, reducing the likelihood of the PBOC cutting the 2.0% rate of the one-year Medium-Term Lending Facility next week. The dollar trades near its recent trough against the yuan, and the PBOC’s setting of the dollar’s reference rate at CNY7.1754 is a fourth consecutive adjustment, hinting at potential increased flexibility in yuan management. In the offshore market, the dollar approaches the upper end of its CNH7.2150-CNH7.2500 range.
### Japan
The dollar experienced volatility against the yen, initially surpassing JPY150 for the first time since March 5, only to see sellers drive it below JPY149.10, and even further to JPY148.75. Follow-through selling reached below JPY148.20, establishing a new weekly low. In Europe, the dollar is better supported and relatively unchanged. Japan’s CPI data for February, due tomorrow, has likely been telegraphed by Tokyo’s earlier report. Inflation has been skewed by government energy subsidies, and headline and core (excluding fresh food) rates likely eased after recent rises.
### Canada
Before the FOMC meeting, the US dollar reached session highs near CAD1.4350 but was subsequently sold to near CAD1.4300. The dollar has risen to a three-day high in Europe near CAD1.4375, surpassing its 20-day moving average. Continued buying could target the CAD1.4450 region. Canada’s recent data showed last month’s price jump exceeded expectations, largely due to the end of a sales-tax holiday. However, US tariffs set for April 2 pose a significant threat to the Canadian economy, with current rates at 2.75% and swaps markets projecting a reduction to 2.25% by year-end.
### Australia
The Australian dollar saw a new session low near $0.6320 before the FOMC announcement, only to recover above $0.6360. Disappointing employment data, showing a loss of nearly 53k jobs against a forecasted 30k gain, sent the Aussie below $0.6300, raising May rate cut possibilities. Furthermore, Australia saw an unemployment rate steady at 4.1%, with the participation rate declining from 67.2% to 66.8%. The next chart support is around $0.6260-$0.6270.
### Mexico
In recent trading, the dollar held below Tuesday’s high (~MXN20.0960) but settled above MXN20.00 for the first time in four sessions, reaching a five-day high near MXN20.1475. The greenback appears to be forming a near-term bottom ahead of next week’s Banxico meeting, which is expected to deliver a 50 basis point cut. A move above MXN20.15 could target MXN20.20, possibly hinting at an advance toward MXN20.30. Meanwhile, Brazil raised its Selic rate by 100 basis points to 14.25%, while the dollar hit a new low since mid-October at ~BRL5.6320 before the decision.
