On Thursday, March 19th, the Bank of Japan maintained its benchmark interest rate at 0.75%, marking the second consecutive meeting of unchanged policy. However, one board member proposed a rate hike, and the central bank explicitly cited Middle East conflicts and oil price volatility as risks to the outlook, indicating new external disruptions to the path of monetary policy normalization. The Bank of Japan stated it will conduct monetary policy appropriately from the perspective of sustainably and stably achieving the 2% inflation target and will continue to raise the policy interest rate based on improvements in the economy and prices. This language continues the previous guidance for gradual hikes and did not signal an earlier tightening. The decision to stand pat was in line with expectations from all 51 economists surveyed by Bloomberg. The statement maintained the basic assessment that the Japanese economy is recovering moderately, noting that the economy is likely to continue growing modestly, inflation expectations have risen moderately, and the mechanism of mild synchronization between wage and price increases is highly likely to continue.
Additionally, the Bank of Canada announced it would maintain the overnight benchmark rate at 2.25%, with the bank rate at 2.5% and the deposit rate at 2.20%. The Bank of Canada stated that conflict in the Middle East has intensified global energy price and financial market volatility, raising global economic risks, with high uncertainty regarding the scope, duration, and economic impact of the conflict. The Bank of Canada's Governing Council judged that current economic activity is weakening, uncertainty is rising, and economic growth faces downside risks; simultaneously, rising energy prices exacerbate inflation risks. The central bank will continue to assess the impact of US tariffs and trade policies, closely monitor the progression of Middle East conflicts and their impact on growth and inflation, and is prepared to take action as needed based on changes in the economic outlook to maintain price stability.
Key data to watch today includes the UK February unemployment rate, UK January three-month average wages including bonuses annual rate, US initial jobless claims for the week ending March 14th, US March Philadelphia Fed Manufacturing Index, US January seasonally adjusted annualized new home sales total, and the final US January wholesale inventories monthly rate. Furthermore, interest rate decisions from the Bank of England and the European Central Bank, due later in the day, require close attention.
Gold / USD Gold fell sharply yesterday, breaking below the 5,000 mark and hitting a fresh 6-week low, with the spot price currently trading around 4950. During the session, the Federal Reserve held rates steady as expected but released signals perceived as hawkish. The subsequent further cooling of expectations for Fed rate cuts, which supported a rise in the US dollar index, was the primary factor pressuring gold lower. Additionally, overall positive economic data released from the US during the session also exerted some downward pressure on gold. Today, focus is on resistance near the 5000 level, with support below around 4900.
USD / JPY The USD/JPY pair moved higher in a fluctuating manner yesterday, reaching a fresh 20-month high, with the current spot price trading around 159.70. Besides the US dollar index's sustained gains, supported by the Fed's steady policy and hawkish signals which cooled rate cut expectations—the main driver behind the pair's climb—expectations for the Bank of Japan to stand pat this week also provided some support. During the early Asian session, the Bank of Japan held policy steady as expected, leading to a slight pullback in USD/JPY; the pair currently trades around 159.70. Today, monitor resistance near 160.50, with support below around 159.00.
USD / CAD The USD/CAD pair edged higher in volatile trading yesterday, reaching a fresh 3-day high, with the current spot price trading around 1.3730. The primary reason for the pair's ascent was the US dollar index reclaiming the 100.00 level, buoyed by diminished expectations for Fed rate cuts. However, persistently rising crude oil prices and the Bank of Canada's decision to hold rates steady while emitting somewhat hawkish signals during the session limited the pair's upside potential. Today, watch for resistance near the 1.3800 level, with support below around 1.3650.
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