Banda Asia: Federal Reserve decision signals a hawkish stance, US Dollar Index recovers to 100.00

On March 19, the Federal Open Market Committee (FOMC) of the Federal Reserve released its latest interest rate decision early this morning, in line with market expectations, maintaining the federal funds rate target range at 3.5% to 3.75%. This is the second consecutive meeting with no change. The FOMC statement showed that the committee members voted 11-1 in favor of the decision. The outlook for the economy remained largely unchanged, but the committee slightly raised its expectations for economic growth and inflation for the full year of 2026. Despite ongoing uncertainties, officials reiterated that multiple rate cuts could still occur in the future. The closely watched “dot plot” indicates that most members expect one rate cut this year and another in 2027, though specific timing remains unclear.

Additionally, during Wednesday’s press conference, Powell stated that U.S. inflation remains stubborn and the outlook is uncertain—variables such as Middle East tensions and tariff disruptions are disrupting the inflation decline. Powell opened by saying that the U.S. economy is expanding, inflation remains somewhat elevated, consumer spending is resilient, but housing activity is weak. He believes the current policy stance is appropriate, “helping to achieve our goals.” Powell reiterated that labor demand has cooled significantly, but the unemployment rate has remained relatively stable since last summer. Past rate cuts should help stabilize the labor market. During the Q&A, he added that there are indeed downside risks to the labor market, but multiple employment indicators show some stability. When assessing, the January and February reports should be considered together.

Key data to watch today include UK February unemployment rate, UK January three-month average wage growth rate including bonuses, U.S. initial jobless claims for the week ending March 14, U.S. March Philadelphia Fed Manufacturing Index, U.S. January seasonally adjusted new home sales annualized total, and U.S. January wholesale inventories monthly rate final. Additionally, focus on the rate decisions from the Bank of Japan (midday), Bank of England, and European Central Bank (evening).

Dollar Index

The dollar index rebounded sharply yesterday, recapturing the 100.00 level, with the spot exchange rate around 100.10. Besides short covering providing some support, the Federal Reserve’s steady rate stance and hawkish signals, along with cooling expectations for rate cuts, were key factors supporting the dollar’s rise. Moreover, strong U.S. economic data released during the period also supported the currency. Today, watch for resistance around 100.50, with support near 99.50.

EUR/USD

The euro declined yesterday, breaking below 1.1500, with the current rate around 1.1480. The dollar index’s recovery to 100.00, driven by good economic data and hawkish signals from the Fed, was the main reason for euro weakness. However, strong CPI data from the Eurozone limited the decline. February Eurozone CPI rose 1.9% year-over-year, with core CPI up 2.4%, both in line with market expectations. Today, focus on resistance around 1.1550 and support near 1.1400.

GBP/USD

The British pound declined yesterday, falling below 1.3300, with the current rate around 1.3290. The dollar’s recovery to 100.00, supported by strong economic data and hawkish signals from the Fed, along with reduced expectations for rate cuts, was the main reason for the pound’s weakness. However, delayed expectations of rate cuts by the Bank of England limited further declines. Today, watch for resistance around 1.3400 and support near 1.3200.