Is the dollar breakout imminent? Bank of America predicts Powell may weaken policy commitments

Asian Market Review

On Monday, the US dollar index plunged during the session as US retail sales data was lower than expected. As of now, the US dollar price is 103.53.

The monthly retail sales rate in the United States in February recorded 0.2%, lower than the expected growth of 0.6%, and the previous value revised to -1.2% from -0.9.

Trump officially announced that Bowman will take over as vice chairman of the Federal Reserve's financial supervision.

The OECD lowered its global growth outlook, lowering its U.S. growth forecast for 2025 from 2.4% to 2.2%, and lowering its 2026 forecast from 2.1% to 1.6%.

According to the Financial Times, the European aihuaforex.commission will announce an investigation into the aluminum market on Wednesday, aiming to verify the sudden surge in imports. Surveys target all trading partners. It will also tighten loopholes in the steel import tariff system.

The national economy "report card" from January to February was released: the total retail sales of consumer goods was 837.31 billion yuan, an increase of 4.0% year-on-year; the added value of industrial above-scale industries increased by 5.9% year-on-year; the average national urban surveyed unemployment rate was 5.3%.

Trump: Will talk to Putin on Tuesday morning (East Time).

Any further attack or retaliation of the Houthi forces will be responded.

US media: Trump discusses the issue of recognizing Crimea as Russian territory, but does not do itMake any decision.

The Democratic Republican M23 of the Congolese rebels decided not to participate in the peace talks; Rwanda announced that he would sever diplomatic relations with Belgium; and the EU sanctions three Rwandan personnel.

Da announced that it would sever diplomatic relations with Belgium; the EU sanctions three Rwandan personnel.

Summary of institutional views

Morgan Stanley looks forward to the Federal Reserve meeting: This statement will be quite challenging and the description of economic activities will be adjusted

We expect the Federal Reserve to maintain the target range of the federal funds rate at its March meeting, maintaining it at 4.25-4.50%. The core message of the January meeting - Powell stressed that the Fed "is not in a hurry" to adjust its policy - may continue to maintain it at the March meeting.

Policy Statement: We expect a moderate adjustment in the description of economic activity in the FOMC statement, and the Fed can say that growth has slowed down from its rapid pace in the second half of last year. Apart from that, we do not expect any other changes. Overall, we believe the Fed will continue to say the risks of achieving a dual mission are “roughly balanced”, although this statement will be challenging as growth faces downside risks and inflation faces upside risks.

Economic forecast: It is expected to moderately lower the growth in this year and next two years, and moderately increase inflation. As part of the slowdown reflects a decrease in immigration, we expect the Fed to predict unemployment is close to current levels. If so, then appropriate policies should remain the same, and the aihuaforex.commission expects to cut interest rates twice this year and twice next year. The long-term dot matrix is ​​also the same as that.

Press Conference: We expect Chairman Powell to be cautiously optimistic about growth and anti-inflation, but emphasize patience, as the direction of monetary policy ultimately depends on the net effect of policy choices not yet made. Finally, we expect the Fed to continue to have meaningful discussions around the possibility of balance sheet shrinkage and quantitative tightening ending.

Goldman Sachs looks forward to the Federal Reserve meeting: To avoid escalating market turmoil, the market needs to pay attention to the dot map...

We expect FOMC to reiterate that it is not in a hurry to cut interest rates further and intends to stay on the sidelines until policy changes under the new government become less turbulent and uncertain and the outlook becomes clearer. Although, we expect FOMC attendees to reconsider their forecasts as the first tariffs have already aihuaforex.come into effect and further tariff increases seem likely to happen.

Dot Matrix: We suspect that the Fed still prefers the median point of the dot map in 2025 to continue to show two interest rate cuts to avoid increasing market recent turmoil. We also expect the median dot maps to remain unchanged in 2026 and 2027, which means interest rate paths for 2025, 2026 and 2027 are 3.875%, 3.375%, and 3, respectively.125%, although the annual average will be higher than the last time. Long-term or neutral interest rate forecasts may continue to climb from 3% to 3.125%.

Economic Forecast: It is expected to show that the core PCE inflation rate will be raised by 0.3% to 2.8% in 2025, while the GDP growth rate will be lowered by 0.3% to 1.8%, which mainly reflects the impact of tariff news.

Wells Fargo looks forward to the Federal Reserve meeting: economic forecasts may face a aihuaforex.comprehensive downward revision, and the dot chart may indicate a space for interest rate cuts within the year.

Policy statement: Although US economic activity has maintained a continuous cooling trend since the end of the FOMC meeting in January, we believe that at the March meeting, the FOMC's position of keeping a wait-and-see position will not change, which means that interest rate cuts will continue to be suspended at this meeting. It is expected that the policy statement will mention a moderate slowdown in economic growth and labor market momentum, but the overall wording changes are limited, and the assessment of "basic balance of employment and inflation target risks" will continue to be maintained. It is worth noting that the meeting may start a discussion on balance sheet policy adjustments to pave the way for the final end of balance sheet reduction. We expect quantitative austerity adjustments to be postponed to the meeting announcement on May 7.

Economic Forecast: The latest dot map may maintain the expectation of a 50 basis point cut in the year, but it is reasonable if the median value is upward to 75 basis points. It is just based on the current market pricing expectation of a 73 basis point interest rate cut this year. If the dot matrix chart is unexpectedly revised to a single interest rate cut, it may trigger a tightening of financial conditions. In terms of economic forecasts, it may downgrade the median GDP growth in 2025 to below 2.0%, and the unemployment rate expectations may remain at 4.3%, but an unexpected increase to 4.4% is also possible. Inflation forecasts may face pressure from upward revisions, with the median forecast of core PCEs likely upward to 2.7%, indicating that the anti-inflation process may lag behind expectations.

Press Conference: Powell may continue the policy tone of "no rush to act", but may release subtle turn signals through dovish remarks - acknowledging that the downward risks of the labor market have increased, opening a window for future easing. Given that inflation is still above the target and needs to be anchored stably, it may emphasize policy flexibility and seek a balance between "maintaining a restrictive position to deal with inflation stickiness" and "timely responding to unexpected weakness in the employment market." Regarding the interest rate cut path that the market is concerned about, it is expected that it will still avoid preset routes, but it may imply that if inflation continues to fall and the job market deteriorates significantly, the pace of policy adjustments may accelerate.

JasperLawler, research director of London Capital Group: The first year of the euro's rise is approaching, and the European pound will usher in a breakthrough in the rise?

In the mainstream trading products on the market, there are usually only 1-2 opportunities with long-term allocation value every year. The specific quantity depends on the market coverage of the trader. Looking back on 2024, gold and US stocks have become the main market throughout the year; and in 2025, we believe that the most promising trading target may be the euro, and of course, the possibility of misjudgment or delayed timing cannot be ruled out. Therefore,Clear downside risk control is required for any position.

The main basis for us to make this judgment is the technical form. Currently, the euro is testing key resistance levels against multiple currency pairs. The price trends of some currency pairs are changing from bear market to bull market, while others are turning from consolidation pattern to upward breakthroughs. Although most of these have not yet confirmed a breakthrough, we have begun to plan for an upward market. In fact, the establishment of long-term positions does not require waiting for fundamental changes to catalyze. The fundamental logic that drives the market is usually clear after the trend is established. However, the eurozone has seen a major policy shift: Germany, as the largest economy in Europe, announced the lifting of the "debt brake" mechanism that has been implemented for 15 years. The new policy not only raises the exemption limit for national defense security spending to 1% of GDP, but also plans to expand fiscal stimulus through a 50 billion euro infrastructure fund. Government spending, as a constituent element of GDP, usually pushes up economic growth expectations, which may in turn trigger upward pressure on interest rates, which supports the local currency exchange rate. In addition, the EU's resolution to collectively increase defense spending further strengthened the long-term economic growth momentum of the eurozone.

Take the euro against pound as an example, the weekly level chart shows that the euro pound was blocked from the long-term downward trend line last week, and closed on Friday with a special K-line pattern of the same length as the entity and the upper shadow line. We will not view it as a signal of a trend reversal at this time, and there is a possibility of further decline this week. But if the weekly line can close above 0.84 and downtrend lines in the future, we will turn bullish on it.

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