Key events to watch in the week ahead: 20-24 Mar 2023

This week’s overview

This week has been a roller-coaster ride for global markets, with a series of banking fallouts triggering a wave of panic before somewhat settling down towards the end of the week. For now, the risk environment treads in a cautiously optimistic state, attempting to take on some relief from the extreme bearish sentiments. With the instabilities pushing rate expectations to the ‘dovish’ end, the upcoming week will leave any validation in the hands of a few central banks, particularly the US Federal Reserve (Fed). Policy rate decisions out of the Bank of England (BoE) and Swiss National Bank (SNB) will also be on watch.

Here are some key events to watch next week:

23 March 2023 (Thursday, 2am SGT): US Fed interest rate decision

Recent global financial instabilities have driven expectations that the Fed may be forced to put some focus on short-term economic stability in its policy outlook, which complicates the fight against still-elevated inflation. A 25 basis-point (bp) hike from the Fed next week is the broad consensus (80% probability), while Fed Funds futures pricing suggests that we could see an end to the rate hiking cycle by June this year. This is a stark contrast from previous policymakers’ guidance, with the upcoming dot plot to reveal whether such market pricing is being one-sided.

Any deviation away from a 25 basis-point move could potentially reignite market jitters. A 50 basis-point hike may trigger concerns of further side-effects from aggressive policy tightening, while a rate pause could suggest that the banking fallout may be more severe than expected to force some dovishness from the central bank. Economic projections will also be on watch to provide clues on policy outlook, with a focus on whether inflation projections will see a downward revision.

The US dollar has been a beneficiary of safe-haven flows, but a less hawkish recalibration in rate expectations is also keeping bullish sentiments in check. Near term, the 103.12 level will remain a key support to hold, failing which could pave the way to retest the 101.30 level next. Greater conviction for the dollar bulls may have to come from a move back above the key 105.00 level.

23 March 2023 (Thursday, 1pm SGT): Singapore’s February inflation rate

Following the renewed surge in inflation in January, pricing pressures are expected to show further persistence with a move to 5.7% from the previous 5.5%. This may seek to overturn hopes of a peak in inflation and raise the odds of further tightening from the Monetary Authority of Singapore (MAS) in April. Considering that the month of January could bring some one-off effects from the Chinese New Year period and the 1% GST rise, the upcoming figure should provide a clearer picture of the inflation trend. Previous projections from the MAS suggests that core inflation may remain elevated for the first half of this year, with any persistence in Singapore’s inflation to translate to SGD strength on speculation of tighter monetary policies.

The USD/SGD has been hovering above key support at the 1.341 level lately, with the turn in moving average convergence/divergence (MACD) suggesting some moderating upward momentum. Greater conviction for the bears may come from a break below the 1.337 level, where a Fibonacci confluence zone resides, which could pave the way towards the 1.318 level next.

23 March 2023 (Thursday, 8pm SGT): BoE interest rate decision

The previous BoE meeting in February saw a 50 basis-point move but attention is on the softer tone for its forward guidance, which suggested that the central bank’s hiking cycle could be nearing its end. Dovish rate expectations were further reinforced in the aftermath of recent global banking worries, with interest rate futures pricing a 40% probability that we will have a rate pause from the BoE next week. This is a stark shift from the 25% at the start of the week and 10% last month. Further evidence of disinflation will be sought from UK’s February inflation rate, which will be released a day before the meeting, but nevertheless, another one or two more 25 basis-point moves should mark the end of the tightening cycle.

The GBP/USD has managed to defend its double-top formation thus far, bouncing off the 1.180 level last week, where its 200-day moving average (MA) stands. An upturn in the MACD revealed building upward momentum and staying above its 200-day MA line could keep buyers in control. This may leave the 1.243 level on watch next, where the double-top peaks are in place.

23 March 2023 (Thursday, 4.30pm SGT): SNB policy rate decision

The SNB has been put in a difficult position lately, with Swiss’ higher-than-expected inflation keeping the pressure on for tighter policies but has to tread carefully with the global attention on Credit Suisse’s woes. Having hiked three times in 2022 to raise its policy rate out of negative territory to 1%, inflation remains above the targeted rate at 3.4% in February. Speculations have taken on a less hawkish shift this week, with market pricing for a 25 basis-point hike instead of the 75 basis-point move originally priced at the start of the month. Sticking to smaller hikes could be the preferred approach while waiting for the dust to fully settle.