11.03.2024: Three rate cuts instead of six? US CPI sheds light on Fed’s agenda. EUR/USD, crude oil

Описание: In the context of hawkish remarks from Fed’s policymakers, Wall Street indices pulled back from the highs printed at the end of the last week. While the Federal Reserve is determined to maintain high interest rates to ensure disinflation, US stocks remain under selling pressure.
Investors are worried that US stocks are currently overvalued. Besides, investors have detected imbalance in the stock market. The thing is that the rapid rally of the S&P 500 is mainly driven by stocks of 7 heavyweights.
Another cause for concern is uncertainty in the US banking sector. After a mini-crisis in 2023, New York Community Bancorp acquired the collapsed regional Signature Bank.
Two weeks ago, the company astonished investors, reporting unexpected losses in the final quarter. Following the warning, shares of New York Community plunged almost twice. Later on, they rebounded, but investors were discouraged by the bitter aftertaste.
Investors neglected any signs of a recession in light of upbeat macroeconomic data released in a few recent weeks. So, the major stock indices conquered historic highs.
The Nasdaq 100 topped the landmark level of 18,000 yesterday. Japan-traded Nikkei 225 closed at the highest mark in the last 34 years. Thanks to strong performance on Wall Street and weakness in the Japanese yen, the index spiked to 38,300.  
The ZEW economic sentiment index was published in the Eurozone. The reading climbed to 19.9 in February, the strongest level in the last year. Sentiment among large investors improves amid hopes that influential central banks will begin monetary easing this year.
At the same time, investors moderated their expectations for rate cuts. For example, in December, the market predicted 5 or 6 rounds of monetary easing in the US. Now the US regulator drops a hint about 3 or 4 rate cuts in 2024.
In fact, actual policy decisions will depend on incoming economic data and a geopolitical situation. The US dollar and the euro respond to fresh economic data in a different way. Investors have elevated expectations for the US economy. Hence, the greenback needs stunning economic metrics to extend its strength.
Unlike the greenback, the euro gives a positive response to any better-than-expected figures amid a low morale in the Eurozone. Today the euro/dollar pair reacted exactly in the same way to economic data from Germany and grew to 1.079.
The euro’s rise was interrupted abruptly by the fresh US inflation data. The euro/dollar pair took a nosedive instantly. The price sank from the previously tested level of 1.080 which now acts as resistance.
As we expected yesterday, this level remains critically important for the euro’s growth. For this, the euro needs to settle above 1.080. It has not happened so far.
On the contrary, the euro/dollar pair tested again a local low of December. In case the instrument settles below 1.070, the euro could gain bearish momentum. Otherwise, the area of 1.070 – 1.073 could serve as support for the euro.


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