The monetary policy announcement by the Federal Reserve on Thursday (March 20, 2025) early morning had a significant impact on market movements during the European trading session. As highlighted in the previous Macro Overview, the Fed has maintained interest rates at 4.25% – 4.5% and still anticipates two rate cuts this year.
Additionally, the Fed has lowered its economic growth forecast for the United States (Gross Domestic Product/GDP) to 1.7% for this year, a drop from the previous December projection of 2.1%.
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Tonight’s trading session will see increased volatility as it coincides with the monetary policy announcement from the Bank of England (BoE) and several key US economic data releases.
According to data from Trading Central:
- Bank of England interest rate announcement (March); forecast 4.5% vs previous 4.5%
- Philadelphia Federal Reserve Manufacturing Index (March); forecast 11 vs previous 18.1
- US unemployment claims (March/15); forecast 225K vs previous 220K
- Existing home sales in the US (February); forecast 4.05 million vs previous 4.08 million
GOLD
Gold prices (XAUUSD) have corrected to US$ 3,025.69 per troy ounce after hitting a record high of US$ 3,057.48 earlier this morning. The Fed’s downgrade of GDP projections, along with an upward revision of inflation estimates, initially spurred the rise in Gold prices.
However, the sharp increase led to profit-taking which caused a correction. Furthermore, the US dollar has regained strength due to pressures on the euro and the pound.
The trend of profit-taking on Gold may continue tonight, especially if the US dollar remains strong.
OIL
Oil prices (CLS10) rose in early European trading, reaching a daily high of US$ 67.51 per barrel. Despite this increase, negative sentiments loom over the oil market, particularly due to the potential increase in supply from Russia if a ceasefire with Ukraine is achieved.
Moreover, the economic slowdown in the US carries the risk of diminishing demand, which may continue to put pressure on oil prices and create vulnerability to price reversals.
EURUSD
The EURUSD pair plummeted during the start of the European session, hitting a daily low of 1.08333. Compared to the Wednesday closing, this reflects a decline of 692 points (68.2 pips).
The drop was influenced by comments from European Central Bank (ECB) President Christine Lagarde, who indicated that the US-Europe trade conflict could reduce eurozone economic growth by 0.5 percentage points.
This sentiment is likely to continue impacting trading tonight.
GBPUSD
The GBPUSD currency pair fell at the beginning of the European trading session, reaching a daily low of 1.29359. In comparison to the Wednesday market close, GBPUSD is down by 670 points (67 pips).
This downturn occurred despite relatively strong UK labor market data, as market participants await the monetary policy announcement from the Bank of England (BoE) later tonight. The BoE is expected to maintain interest rates at 4.5%, but traders will be eager to see projections on when further cuts might occur.
Since GBPUSD is still near a four-month high, significant price movements could ensue. If the BoE signals potential rate cuts in the near future, there could be further downward pressure on GBPUSD.
USDJPY
The USDJPY pair has limited its decline at the beginning of the European trading session after touching a daily low of 148.174. This movement indicates a robust US dollar.
Positive sentiment for USDJPY is likely to increase if tonight’s US economic data surpasses expectations.
Nasdaq
The Nasdaq index reversed its upward trend during the start of the European session, reaching a daily low of 19,734 after previously climbing to 20,091.
This movement reflects a negative sentiment due to the risks associated with a wider trade war and ongoing US economic slowdown which continue to cast a shadow over Nasdaq. These factors are expected to contribute to volatility and likely downward pressure on Nasdaq trading tonight.
