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Respondents to the March CNBC Fed Survey have raised the risk of recession to the highest level in six months, cut their growth forecast for 2025 and raised their inflation outlook.

Much of the change appears to stem from concern over fiscal policies from the Trump administration, especially tariffs, which are now seen by them as the top threat to the US economy, replacing inflation. The outlook for the S&P 500 declined for the first time since September.

The 32 survey respondents, who include fund managers, strategists and analysts, raised the probability of recession to 36% from 23% in January. The January number had dropped to a three-year low and looked to have reflected initial optimism following the election of President Trump. But like many consumer and business surveys, the recession probability now shows considerable concern about the outlook.

"We've had an abundance of discussions with investors who are increasingly concerned the Trump agenda has gone off the rails due to trade policy," said Barry Knapp of Ironsides Macroeconomics. "Consequently, the economic risks of something more insidious than a soft patch are growing."

"The degree of policy volatility is unprecedented,'' said John Donaldson, director of fixed income at Haverford Trust.

The average GDP forecast for 2025 declined to 1.7% from 2.4%, a sharp markdown that ended consecutive increases in the three prior surveys dating back to September. GDP is forecast to bounced back to 2.1% in 2026, in line with prior forecasts.

"The risks to consumers' spending are skewed to the downside," said Neil Dutta, head of economic research at Renaissance Macro Research. "Alongside a frozen housing market and less spending across state and local governments, there is meaningful downside to current estimates of 2025 GDP."

Fed rate cut outlook

Most continue to believe the Fed will cut rates at least twice and won't hike rates, even if faced with persistently higher prices and weaker growth. Three-quarters forecast two or more quarter-point cuts this year. Part of the reason is that two-thirds believe that tariffs will result in one-time price hikes rather than a broader outbreak of inflation. But the policy uncertainty has created a wider range of views on the Fed than normal with 19% believing the Fed won't cut at all.

Still, higher tariffs and weaker growth are a dilemma for the Fed.

"Powell is really stuck here because of the tariff overhang," said Peter Boockvar, chief investment officer, Bleakley Financial Group. "If he gets more worried about growth because of them and cuts rates as unemployment rises but then Trump removes all the tariffs, he's jumped the gun."

More than 70% of respondents believe tariffs are bad for inflation, jobs and growth. 34% say tariffs will decrease US manufacturing with 22% saying they will result in no change. Thirty-seven percent of respondents believe tariffs will end up in greater manufacturing output. More than 70% believe the DOGE effort to reduce government employment is bad for growth and jobs but will be modestly deflationary.

"A global trade war, haphazard DOGE cuts to government jobs and funding, aggressive immigrant deportations, and dysfunction in DC threaten to push what was an exceptionally performing economy into recession," said Mark Zandi, chief economist, Moody's Analytics.

Source: CNBC

Central bank meetings in Japan, the U.S., Britain, Sweden and Switzerland round out the week.

Since the start of the year, Hong Kong's Hang Seng has surged while S&P 500 has struggled.

Source: Reuters

On Tuesday, the price of Gold surged to an unprecedented 3,013 USD per troy ounce, marking a new all-time high. This milestone follows a prolonged upward trend, driven by heightened investor demand for safe-haven assets ahead of the US Federal Reserve’s decision on interest rates.

Key Drivers Behind Gold’s Rally

The Federal Reserve’s two-day meeting, which began today and concludes Wednesday evening, is the focal point for investors. While the base scenario suggests the Fed will maintain current interest rates, market participants are closely watching for updated economic forecasts and insights from Chair Jerome Powell’s press conference. His remarks could explain future monetary policy, particularly amid ongoing trade tensions and tariff disputes.

Geopolitical uncertainties are also fuelling Gold’s ascent. On Monday, US President Donald Trump issued a stern warning to Iran, holding it directly accountable for any further attacks by Yemen’s Houthi rebels. The group has threatened to target foreign vessels in the Red Sea, including those of the US.

Additionally, Trump announced plans to hold talks with the Russian president on Tuesday morning to discuss a potential ceasefire, further adding to the global uncertainty driving investors toward Gold.

Technical Analysis of XAU/USD

On the H4 chart, XAU/USD has formed a tight consolidation range around the 2,945 level, signalling the continuation of an upward growth wave. Today, we anticipate the price to test the 3,010 level, which serves as a local target. Following this, a corrective pullback toward 2,945 (testing from above) is possible. Once this correction concludes, we expect a new growth wave targeting the 3,057 level. This scenario is technically supported by the MACD indicator. The signal line has exited the histogram zone and is pointing sharply downward, indicating potential for upward momentum after the correction.

On the H1 chart, XAU/USD has completed the structure of the growth wave, reaching the 3,015 level. We now expect the start of a corrective move toward 2,945. After this correction, the price will likely resume its upward trajectory, targeting the 3,057 level. Upon reaching this target, we will assess the possibility of a more significant correction towards the 2,900 level. This outlook is further confirmed by the Stochastic oscillator. Its signal line is currently below the 80 level and trending downwards towards 20, suggesting a high probability of a corrective phase.

Conclusion

Gold’s record-breaking rally reflects a combination of macroeconomic uncertainty, geopolitical tensions, and technical momentum. With the Federal Reserve’s decision and global developments in focus, the precious metal remains a key asset for investors seeking stability. As the market navigates these dynamics, further milestones for Gold prices appear increasingly likely.

Source: ACTIONFOREX

This is a follow-up analysis of our prior report, “USD/JPY: Yen strength elements emerged ahead of BoJ meeting next week” dated 16 January 2025.

Since our last publication, the price actions of the USD/JPY have transformed into a three-month medium-term downtrend where it tumbled by around 8% from its 10 January 2025 high of 158.88 to its recent 11 March low of 146.54.

The recent three-month Japanese yen strength against the US dollar has been supported by hawkish remarks from key Bank of Japan (BoJ) officials including Governor Ueda that guided BoJ’s third rate hike on 24 January to increase its key policy interest rate to 0.5%.

Also, economic data in the past two months have supported BoJ’s current monetary policy stance of “gradual increases in interest rates” as Japan’s core-core inflation rate (excluding food and energy) accelerated to 2.5% y/y in January, its highest rise since March 2024, above BoJ’s price target of 2%.

Secondly, wage growth for Japanese employees has moved in line with BoJ’s outlook as well. Last Friday, Rengo, the largest Japanese Trade Union Confederation announced in its preliminary report that its members have secured pledges from companies of an average 5.46% rise in wages for the 2025 fiscal year starting from April, the biggest wage rise in 34 years, and above last year’s increase of 5.28%.

Aggressive US trade tariffs policy created uncertainty in Japan’s growth prospects

The recent outlook on Japan’s inflation and wage growth trend has triggered a swift rally in longer-term sovereign bond yields in Japan. The 10-year Japanese Government Bond (JGB) yield has risen to 1.50%, its highest level since 2008.

Given the rapid rise in the 10-year JGB yield that is likely to increase funding costs in Japan coupled with the rising risk of slower economic growth globally due to the US White House’s aggressive trade tariffs policy, market participants expect BoJ to stand pat on Wednesday, 19 March monetary policy decision and await for BoJ Governor Ueda’s latest guidance with the likelihood of another rate hike to be enacted in June or July according to consensus at this time of the writing.

Narrowing US Treasuries-JGBs yield spreads support further JPY strength

Fig 1: 10-YR & 2-YR yield spreads of US Treasuries/JGBs medium-term trends as of 18 Mar 2025 (Source: TradingView, click to enlarge chart)

The 10-year and 2-year yield spreads of the US Treasury notes over JGBs have continued to narrow (trended downwards) after they hit key pivotal resistances of 3.60% and 3.84% respectively in early January.

If their downward trajectory remains intact where the 10-year and 2-yield spreads of the US Treasury notes over JGBs may see further downside towards 2.40% and 2.90% respectively, which in turn may trigger further downside pressure on the USD/JPY (see Fig 1).

Watch the key resistance of 150.70/151.50 on USD/JPY

Fig 2: USD/JPY medium-term trend as of 18 Mar 2025 (Source: TradingView, click to enlarge chart)

The recent rebound of 2.2% in the past five sessions seen in the USD/JPY from its intraday low of 146.54 on 11 March to its current level of 149.80 at this time of the writing is likely to be a minor corrective rebound sequence within a medium-term downtrend phase.

Watch the 150.70/151.50 key medium-term pivotal resistance and a break below 148.25 intermediate support may trigger another impulsive down move sequence to retest 146.90 before the next medium-term support comes in at 144.80 (see Fig 2).

On the other hand, a clearance above 151.50 invalidates the bearish scenario for a squeeze up toward the next medium-term resistance at 154.15.

Source: ACTIONFOREX

Source: Poundsterlinglive