• Fed kept rates unchanged and reaffirmed its 2024 three rate cuts projection, 2025 and 2026 FFR forecast raised.
• Powell noted that January/February CPI and PCE data was quite high, but there are reasons to believe there were seasonal factors at play.
• APAC stocks were mostly underpinned after the fresh record levels on Wall St post-"dovish" FOMC.
• European equity futures indicate a higher open with the Euro Stoxx 50 future +1.2% after the cash market closed down 0.2% on Wednesday.
• DXY was soft post-FOMC, AUD boosted by strong jobs data, USD/JPY is back below 151, GBP eyes BoE.
• Looking ahead, highlights include French, German, EZ, UK & US PMIs, US IJC, Japanese CPI, BoE, SNB, Norges & CBRT Policy Announcements, Comments from Norges Bank Bache, SNB's Jordan & Fed's Barr, Supply from Spain, France & US.

US TRADE

EQUITIES

• US stocks rallied in which the S&P 500 and the DJIA climbed to fresh record highs after the Fed reaffirmed its three rate cuts in 2024 projection, despite higher longer-term dots, and as Fed Chair Powell played down the hot January and February inflation data. As such, the rate-sensitive sectors outperformed and the small-cap Russell 2k led the advances among the indices, while Treasuries bull-steepened after the FOMC and Dot Plot, with the higher longer-run dots weighing more out the curve.
• SPX +0.89% at 5,225, NDX +1.15% at 18,240, DJI +1.03% at 39,512, RUT +1.92% at 2,075.
• Click here for a detailed summary.

FOMC

• FOMC held rates at 5.25-5.50%, as expected, while the statement was little changed in which it noted that job gains have remained strong (prev. said job gains have moderated since early last year but remain strong) and repeated that recent indicators suggest that economic activity has been expanding at a solid pace. FOMC maintained the current pace of the balance sheet drawdown and it still sees three cuts this year but the 2025 projection was increased to 3.75-4.00% (prev. 3.50-3.75%) and 2026 was increased to 3.00-3.25% (prev. 2.75-3.00%), while the Neutral Rate estimate was raised to 2.6% (prev. 2.5%).
• Fed Chair Powell said during the post-meeting statement that the economy has made considerable progress and inflation has eased substantially but inflation is too high and ongoing progress is not assured. Powell reiterated the policy rate is likely at its peak and it will likely be appropriate to dial back rates sometime this year, while he noted they are prepared to keep rates higher for longer if needed and will assess incoming data when setting policy. Powell also stated that the Fed does not expect to reduce rates until it has greater confidence that inflation is sustainably moving back to the target and participants discussed the balance sheet at this meeting with the general sense to slow the pace of the runoff fairly soon.
• Fed Chair Powell said during the Q&A that new projections do not mean a higher tolerance for inflation and inflation data came in a little higher than expected, but the Fed is still making good progress on bringing inflation down. Powell said risks are now two-sided and the first rate cut is therefore consequential, while the Fed wants to be careful and will let the data speak on that. Powell also noted that January/February CPI and PCE data was quite high, but there are reasons to believe there were seasonal factors at play and pointed out that inflation tends to be stronger in the first half of the year, as well as stated they are not going to overreact to two months of data but will not ignore it either and are examining whether it is a bump in the road or perhaps more. Furthermore, he is unsure if the data was a bump on the inflation road or something more and noted recent inflation data has certainly not improved anyone's confidence but has not altered the story that inflation is coming back down to 2% on a sometimes-bumpy path, while his main message to Congress on 'confidence' was that the FOMC needs to see more evidence that inflation is moving down sustainably to the target and does not anticipate rate cuts without this confidence.

APAC TRADE

EQUITIES

• APAC stocks were mostly underpinned after the fresh record levels on Wall St post-dovish FOMC where the Fed maintained the projection for 3 rate cuts in 2024 and Powell downplayed recent hot inflation data.
• ASX 200 strengthened with sentiment also helped by a stellar jobs report and a fall in unemployment, while gold miners outperformed after the precious metal rose above USD 2,200/oz to a new all-time high.
• Nikkei 225 rallied from the open to unprecedented levels north of 40,800 despite recent hawkish source reports.
• Hang Seng and Shanghai Comp. were mixed in which the Hong Kong benchmark rallied to just shy of the 17,000 level amid strength in the property sector and as the Fed projection for three rate cuts keeps similar action on the table for the HKMA. Conversely, the mainland lagged as the PBoC injected the least amount of funds in its open market operations since August last year despite the PBoC's Deputy Governor reaffirming that China's monetary policy has ample room and there is still room for cutting RRR.
• US equity futures (ES +0.4%, NQ +0.7%) were firmer after the FOMC euphoria and with tech supported by strong Micron earnings.
• European equity futures indicate a higher open with the Euro Stoxx 50 future +1.2% after the cash market closed down 0.2% on Wednesday.

FX

• DXY languished at yesterday's worst levels after slipping in the aftermath of the dovish FOMC.
• EUR/USD benefitted from the dollar weakness and climbed above the 1.0900 level as the dollar was sold in reaction to the Fed.
• GBP/USD tested the 1.2800 level to the upside after a dovish FOMC reverberated across asset classes, while attention now turns to the BoE policy decision due later.
• USD/JPY retreated below the 151.00 handle amid the Fed-induced dollar selling and a hawkish source report that the BoJ is seen weighing the next rate hike in July or October as the yen weakens.
• Antipodeans extended their gains with AUD underpinned by a blockbuster jobs report and NZD was unfazed despite the surprise contraction in Q4 GDP data which showed New Zealand's economy slipped into a recession.
• PBoC set USD/CNY mid-point at 7.0942 vs exp. 7.1792 (prev. 7.0968).
• Brazil Central Bank cut the Selic rate by 50bps to 10.75%, as expected, while the committee unanimously anticipates a further reduction of the same magnitude in the next meeting and it stated monetary policy stance is appropriate to keep the necessary contractionary monetary policy for the disinflationary process.
• BoC Minutes stated the Governing Council agreed conditions for rate cuts should materialise in 2024 if the economy evolved as expected and members had differing views about when there would likely be enough evidence to judge whether conditions for cuts were in place, while there were differing views of how to weigh risks to the inflation outlook.

FIXED INCOME

• 10-year UST futures remained afloat after yesterday's bull steepening owing to the Fed sticking to its projection of three rate cuts this year with higher long-run dots.
• Bund futures traded rangebound following the recent choppy performance and unmoving ECB rhetoric.
• 10-year JGB futures were marginally lower after a hawkish source report in Nikkei that the BoJ is seen weighing the next rate hike in July or October as the yen weakens, while prices were also not helped by weaker demand at the enhanced liquidity auction.

COMMODITIES

• Crude futures clawed back some of the prior day's losses after WTI rebounded from a floor around USD 81.00, while the recovery also coincided with broad dollar weakness owing to a dovish Fed.
• US Congress sent a letter to IEA chief Birol expressing concern that the IEA has strayed away from its mission of promoting energy security and questioned its forecasts for oil demand compared to other entities, according to Energy Intel's Bakr.
• Spot gold extended on the post-FOMC rally to a fresh record high and climbed above USD 2,200/oz.
• Copper futures held on to recent spoils amid the Fed-inspired heightened risk appetite.

CRYPTO

• Bitcoin reversed some of the prior day's firm gains and dipped back beneath the USD 67,000 level.

NOTABLE ASIA-PAC HEADLINES

• HKMA maintained its base rate unchanged at 5.75%, as expected. HKMA said financial and monetary markets in Hong Kong continue to operate in a smooth and orderly manner, while it added that the HKD exchange rate remains stable and Hong Kong dollar interbank rates might remain high for some time.
• PBoC Deputy Governor Changneng Xuan said they will promote effective investment and help resolve excess capacity, while he added that China's monetary policy has ample room and there is still room for cutting RRR. PBoC Deputy said he expects China's nominal economic growth to be around 8% in 2024 and will maintain appropriate growth in credit and total social financing, while they will guide banks to lower deposit rates and lower financing costs, support consumption and investment, as well as promote a rebound in prices.
• China's Vice Finance Minister said fiscal policy will provide the necessary support for achieving the 2024 growth target and China's government debt is at an appropriate level, while he said China has continued to reduce the overall level of tariffs, which has now been reduced to 7.3% and is relatively low in the world, according to Reuters and Global Times.
• China state planner vice chair said they will speed up approval for investment projects and that total bond funds for government investment will exceed CNY 6tln, while they will step up support for private investment and encourage private firms to participate in infrastructure investment projects, according to Reuters.
• BoJ Governor Ueda said the BoJ is expected to maintain an accommodative monetary policy for the time being and accommodative monetary policy is likely to underpin the economy, while he added that cost-push pressure on inflation is dissipating but service prices continue to rise moderately and the preliminary wage negotiation outcome tends to be revised down but even so, they thought the final outcome would be a fairly strong number. BoJ Governor Ueda said as they end massive stimulus, they will likely gradually shrink the balance sheet and at some point reduce JGB purchases but at present, they have no clear idea regarding the timing of reducing JGB buying and scaling back the size of the balance sheet. Furthermore, he said they are not immediately thinking of selling BoJ's ETF holdings and will take plenty of time examining how to reduce ETF holdings.
• BoJ is reportedly seen weighing the next rate hike in July or October as the Yen weakens, according to Nikkei. A source noted that additional hikes are of course on the table and that an early hike leaves room for the BoJ to consider rolling out another increase before the end of the year, while the timeline would keep the BoJ coming off like they are rushing to hike rates. Furthermore, it was stated that a growing number see a July rate boost as another possibility if a weak yen raises the price of imports and accelerates inflation, forcing the BoJ to step in. It was earlier reported that the Yen's decline appears to be raising little alarm at the BoJ for now which was to be expected given that Governor Ueda is maintaining an accommodative stance on policy, according to a source at the BoJ cited by Nikkei. However, it was noted that some at Japan's Finance Ministry are wary of rapid fluctuations in the currency market driven by speculative trades.

DATA RECAP

• Japanese Trade Balance (JPY)(Feb) -379.4B vs. Exp. -810.2B (Prev. -1760.3B)
• Japanese Exports YY (Feb) 7.8% vs. Exp. 5.3% (Prev. 11.9%)
• Japanese Imports YY (Feb) 0.5% vs. Exp. 2.2% (Prev. -9.6%, Rev. -9.8%)
• Japanese Manufacturing PMI Flash SA (Mar) 48.2 (Prev. 47.2)
• Japanese Services PMI Flash SA (Mar) 54.9 (Prev. 52.9)
• Japanese Composite Flash SA (Mar) 52.3 (Prev. 50.6)
• Australian Employment (Feb) 116.5k vs. Exp. 40.0k (Prev. 0.5k)
• Australian Unemployment Rate (Feb) 3.7% vs. Exp. 4.0% (Prev. 4.1%)
• Australian Participation Rate (Feb) 66.7% vs. Exp. 66.8% (Prev. 66.8%)
• Australian Manufacturing PMI Flash (Mar) 46.8 (Prev. 47.8)
• Australian Services PMI Flash (Mar) 53.5 (Prev. 53.1)
• Australian Composite PMI Flash (Mar) 52.4 (Prev. 52.1)
• New Zealand GDP QQ (Q4) -0.1% vs. Exp. 0.1% (Prev. -0.3%)
• New Zealand GDP YY (Q4) -0.3% vs. Exp. 0.1% (Prev. -0.6%)

GEOPOLITICS

• Israeli Channel 14 reported the negotiating team in Qatar was instructed not to agree to a ceasefire, according to Sky News Arabia.
• US military said coalition forces destroyed an unmanned aerial vehicle fired by Yemen's Houthis in the Red Sea and destroyed an unmanned surface vessel on March 20th, according to Reuters.
• Australia and Britain signed a defence pact which includes a status of forces agreement and makes it easier for the respective forces to operate together in each other’s countries, while the agreement also formalises the established practice of consulting on issues that affect our sovereignty and regional security.

EU/UK

NOTABLE HEADLINES

• ECB's Nagel said the ECB is continuously getting closer to the 2% inflation target, while he is more worried about Europe being "the sick man" than Germany.
• Portugal's President named centre-right democratic alliance leader Luis Montenegro as the new PM, according to Reuters.