Dollar up ahead of the Fed and as fear reigns

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What you need to take care of on Wednesday, March 16:

The dollar started the day on the back foot but managed to recover lost ground during US trading hours. EUR/USD is trading around 1.0940, while GBP/USD changes hands at 1.3035.

President Vladimir Putin said kyiv was not serious about finding a mutually acceptable solution. The news dampened hopes for a diplomatic deal. Earlier in the day, adviser to Ukrainian President Volodymyr Zelenskyy said he was confident that a diplomatic solution could be reached in the coming weeks.

Beyond the sanctions, Russia has asked to leave the Council of Europe after being suspended on February 25. Additionally, Moscow announced a series of sanctions against US authorities, including President Joe Biden and banned Canadian Prime Minister Justin Trudeau from entering the country.

European Central Bank President Christine Lagarde speaking at the WELT Economic Summit and noted that the uncertainty surrounding the economic outlook had increased significantly, because war would reduce growth and create inflation due to rising energy and raw material costs. She also said inflation is still expected to decline gradually and settle near the central bank’s 2% target by 2024.

China announced record coronavirus contagions and placed more than 17 million people in strict lockdown, dampening expectations for economic growth. Stocks and commodities were down on concerns about falling demand throughout the first half of the day.

Gold bottomed out at $1,907.04 per troy ounce, rebounding modestly before the close to settle around $1,920 per troy ounce. Crude oil prices extended their latest decline and WTI ended the day at $96.50 a barrel.

AUD/USD spent the day in a tight range, ending the day little changed below 0.7200. The Canadian dollar benefited from the fall in oil prices and the surge in raw materials, which caused the USD/CAD to fall to 1.2766.

Wall Street posted substantial gains despite growing concerns over the Russia-Ukraine crisis. US government bond yields rose, the yield on the 10-year Treasury note hitting a multi-week high of 2.169%, ending the day close.

Market attention now turns to the US Federal Reserve, as the US central bank will announce its monetary policy decision on Wednesday and is expected to trigger a rate hike of at least 25 basis points.

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