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Forex Today: mixed week for the dollar; Has the time come to consolidate?

Here’s what you need to know for the week ahead:

After a week focused on central banks, economic data will return to the spotlight, surrounded by the ongoing banking crisis. The DXY ended the week lower but looked stronger, resurfacing even as US yields fell, helped by deteriorating market sentiment.

On March 8, a new market season began with the bankruptcy of Silicon Valley Bank. In the most recent episode, more central banks decided to raise rates showing their determination to reduce inflation despite bank jitters. The evolution of the banking sector will continue to be decisive for sentiment and expectations of monetary policy. It has tightened bank credit rules, making part of the job of the central bank. Next week, central bankers will likely stick close to the recent guidance.

On Wednesday, the Federal Reserve (Fed) raised rates by 25 basis points, as expected, signaling a moderate pace for future hikes. Initially, the markets reacted by selling the dollar, and Wall Street timidly encouraged. On that day, markets heard from Fed officials for the first time since the banking system crisis.

Wall Street ended the week with modest gains, and the VIX fell sharply. Even so, regional bank actions remain under pressure and with the potential to significantly damage confidence. Over the weekend, market participants will be keeping an eye out for potential banking news. In addition, the US Treasury Secretary, Janet Yellen, could be preparing some surprises.

Possible moves for next week:

  • Regional bank actions.
  • US Treasury Secretary Yellen
  • Eurozone inflation figures
  • US Basic PCE

He DXY settled above 103.00 after testing levels below 102.00. The dollar rebounded despite lower yields, helped by renewed concerns. Economic data showed that activity, at least before the VPC collapse, was not close to a recession. US employment data continues to present a tense market. Next week’s data includes Friday’s core PCE, a closely watched indicator of inflation.

He EUR/USD ended the week higher, heading lower, and momentum moderated quickly. The pair fell 200 points from the 1.0930 zone to close around 1.0750, still above the 20-week SMA. Flash PMIs on Friday showed positive numbers across the board. Preliminary inflation numbers for March next week will be critical. Officials at the European Central Bank continued to talk about the need to do more. Expectations of further rate hikes supported the euro, which was among the best performing currencies.

GBP/USD ended the week mostly flat around 1.2220, after failing to hold above 1.2300. The Bank of England raised the reference rate to 4.25% (7 votes in favor and 2 against). The bank could go higher if inflation doesn’t surprise on the downside in March. Fourth quarter GDP data will be released on Friday.

He and in Japan benefited from declining US yields, outperforming most of its G10 rivals. USD/JPY fell for the fourth week in a row and ended above 130.00, an area that looks set to be tested again in the coming sessions.

USD/CAD it hit monthly highs above 1.3800 and pulled back. Next Tuesday, the Canadian government will present the budget. GDP for January will be released on Friday.

The race AUD/USD from monthly lows ended at the 200 daily SMA near 0.6760, and now it is up to the dollar to decide how far down. Australia will report Retail Sales on Tuesday and critical inflation figures on Wednesday. These figures could cement the decision of the Reserve Bank of Australia that will have its meeting on April 4.

He weight Mexican was the currency that gained the most among the most traded, recovering strongly after falling during the previous two weeks. The USD/MXN pair lost more than 2%, falling below 18.50. The Bank of Mexico will announce its decision next week. It is expected to continue raising rates, but at a slower pace than in February, when it did so by 50 basis points. Core inflation is finally coming down in Mexico, with a semi-annual figure of 8.15%, compared to the previous 8.21%.

Source: Fx Street

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