T3 Monthly Insights - Mar 2024

In March, the DXY initially slipped below the 103 support area and dipped below February's low, before reversing course to close at 104.487 (+0.32% m/m). The U.S. economy presented conflicting data, with a positive nonfarm payroll release, adding 275,000 jobs in February, surpassing economists' expectations of 198,000 new jobs. However, the U.S. unemployment rate also rose to 3.9%, its highest level since January 2022. As widely expected, the Fed opted to maintain its fed fund rate at 5.25 - 5.50%. Initially, investors focused on FOMC’s dovish remarks indicating ongoing concerns about inflation. However, attention swiftly shifted to Fed Chair Powell’s statement that, although the timing remained uncertain, the Fed still anticipates three rate cuts before year-end. Capitalizing on bullish sentiment, the U.S. equity market continued its upward trajectory, reaching new record highs in March.

Euro saw a recovery during the first week of March to 1.0950 resistance level before selling off, concluding the month at 1.0790 (-0.14% m/m). The ECB maintained rates at 4.50% last month, with clear indications from central bank chief Christine Lagarde that the first rate cut is likely to occur in June. However, the subsequent path remains uncertain, and the pace of easing will be entirely contingent on data, especially considering that inflation remains above the 2% target, standing at 2.6% in February.

Sterling exhibited similar price pattern, breaking through December's high to approach 1.2900, marking the highest level for the year, before giving up its gain to end the month at 1.2623, flat to where it started (-0.02% m/m). During its March meeting, the BoE left interest rates unchanged at 5.25% and maintained its outlook for inflation and growth.

Signaling the end of an era characterized by extraordinary monetary easing, the Bank of Japan (BOJ) made a significant policy shift by scrapping their NIRP policy and complex Yield Curve Control (YCC). They raised interest rates for the first time since 2007, establishing a new positive policy range of 0% - 1%. While the BOJ assured continued accommodative financial conditions, they provided no forward guidance on the pace of future rate hikes. Given Japan still maintains the lowest interest rate among G10 peers, traders reverted to yen carry trades once event risk faded, leading to sustained yen weakness. The yen depreciated to its lowest level against the dollar in 34 years, before ending the month at 151.35 (+0.91% m/m). Furthermore, it reached a 16-year low against the euro and its weakest level against sterling since 2015.

Aussie experienced an initial rally before it retraced the entire move, ending the month at 0.6521 (+0.37% m/m). The RBA kept the cash rate steady at 4.35% in March. Later in the month, robust labor data showed a significant drop in unemployment from 4.1% to 3.7%, with February's employment surging by 116,500, far exceeding expectations. The Bank of Canada has left its policy rate unchanged at 5.00% as expected. CAD traded sideways to close the month -0.29% lower at 1.354.

Gold surged to a new high of $2,300 in March, registering a remarkable monthly gain of 9.08%. While technical indicators continue to favor bullish momentum, signs of overbought conditions are starting to emerge. Additionally, Bitcoin reached a new record high of $73,000 before retracing below $70,000 amidst heightened market frenzy.