The Federal Reserve's latest projections indicate slightly higher inflation and slower growth for this year and next. However, the median forecast still predicts two rate cuts in 2025, as it did in December. While the decision to reduce the Treasury holdings unwind and keep the rate cuts on track shows a dovish outlook, risks to inflation persist. The overall market sentiment reflects heightened uncertainty. Meanwhile, the US dollar strengthened, outperforming most G10 currencies, and emerging market currencies generally weakened, with some exceptions in the Asia Pacific region. Despite recent interventions, the Turkish lira remains under pressure.

Asia Pacific Markets

In Asia, the yen saw mixed movements, with the dollar briefly surpassing JPY150 before retreating. Despite volatility, the yen remained under pressure, trading closer to JPY148.20.
As for China, the PBOC kept its loan prime rates unchanged, signaling no immediate interest rate cuts. The yuan remained stable against the dollar, and recent small adjustments in the reference rate could signal potential shifts in monetary policy flexibility. Stocks in the region saw varied performances, with strong gains in Taiwan and Australia, but weaker results in China and Hong Kong.

European Markets

The euro dropped to new lows against the dollar before recovering slightly, with market participants showing less enthusiasm compared to recent days. Support levels are now seen near $1.0825-30. Meanwhile, European Central Bank members are pushing for fiscal space for defense and infrastructure spending, but consensus on collective bond issuance remains lacking.
In Switzerland, the Swiss National Bank cut its deposit rate to 0.25%, a move expected to be the terminal rate.

American Markets

The US dollar strengthened after the Federal Reserve's decision, trading near the 104.00 mark, signaling a potential bottoming pattern. The Fed's updated projections indicated a slowdown in economic growth, but the median PCE inflation forecast was revised upward. Although unemployment is expected to rise slightly, the Fed's move to reduce Treasury roll-offs from $25 billion to $5 billion reflects a more dovish stance. Financial markets are awaiting further data on jobless claims and leading indicators, while economic sentiment remains cautious amid inflation and consumer confidence concerns.