Date: 19th March 2026.
How Did the Fed Prompt Weaker Stocks and a Stronger US Dollar?
Markets were quick to react to the Federal Reserve’s rate decision and press conference. The Federal Reserve made the decision to keep the rate unchanged and many economists saw it as a ‘cautious pause’. The main response to the press conference was the stock market and Gold declining while the US Dollar rose.
Gold is trading at its lowest level since 6 February, the US Dollar is the week’s best performing currency and the NASDAQ fell 1.75%. What did the Federal Reserve Chair say to trigger such a market reaction?
When the Federal Reserve and the Chair proceed as per market expectations, the markets tend to witness minimal volatility. However, this was not the case for March. The Fed Chair, Jerome Powell, told journalists that the economy is stronger than many seem to think and that the Middle East crisis is likely to trigger short-term higher inflation.
These two comments alone indicate that the Federal Reserve is not likely to easily consider cutting interest rates in the near future. When monitoring the FedWatch Tool, before the press conference, 60% of market participants were expecting the Fed to have cut on one occasion in 2026. Now the tool indicates that there is a 60% chance of no cut at all.
According to the Federal Reserve, inflation is still a problem: Powell said inflation remains above the target of the central bank. In the Fed’s projections, total PCE inflation is seen at 2.7% this year, with core PCE around 3.0% in February. Though Mr Powell stressed that developments in the Middle East are uncertain for the US economy and inflation, but will certainly trigger inflation in the short term, unless the conflict lasts longer than previous expectations.
In this context, two factors are vital for investors: the short term and whether the conflict lasts longer than expected. For this reason, investors are pricing in additional risk as the conflict has already lasted longer than previously expected.
HFM - NASDAQ Chart
The NASDAQ and the stock market continue to trade within the recurring price range, but with a slight bearish bias. The issue for the stock market is that higher energy prices are likely to trigger lower consumer sentiment. At the same time, consumers are not likely to obtain relief from lower interest rates. As a result, the stock market looks less attractive to investors, particularly as the US Dollar also performs well.
However, JP Morgan strategists advise they do not expect the NASDAQ to fall below $23,900 under the current market conditions. According to JP Morgan, in order for the NASDAQ to see a decline below this level inflation would have to rise significantly and the conflict would have to escalate. Nevertheless, trend and momentum-based indicators continue to point towards a downward trend.
The best performing currencies of the day so far are the Japanese Yen and US Dollar, while the worst performing is the Pound. For this reason, the GBPUSD shows less conflict and resilience as the price falls.
The main price driver for the US Dollar is the more hawkish central bank and expectations of a higher inflation rate. As institutions change their expectations for monetary policy, so does the pricing of the Dollar. For example, analysts at Goldman Sachs anticipated a 25-basis-point adjustment in September and December. However, they now only expect one cut in December 2026.
The Dollar's upward trend is also in line with market correlations such as the decline in Gold and Silver. For this reason, the price movement is potentially validated. However, the Pound is also likely to experience higher volatility when the Bank of England also confirms its own rate decision and view on market conditions.
Please note that times displayed based on local time zone and are from time of writing this report.
Click HERE to access the full HFM Economic calendar.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!
Click HERE to READ more Market news.
Michalis Efthymiou
HFMarkets
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
How Did the Fed Prompt Weaker Stocks and a Stronger US Dollar?
Markets were quick to react to the Federal Reserve’s rate decision and press conference. The Federal Reserve made the decision to keep the rate unchanged and many economists saw it as a ‘cautious pause’. The main response to the press conference was the stock market and Gold declining while the US Dollar rose.
Gold is trading at its lowest level since 6 February, the US Dollar is the week’s best performing currency and the NASDAQ fell 1.75%. What did the Federal Reserve Chair say to trigger such a market reaction?
When the Federal Reserve and the Chair proceed as per market expectations, the markets tend to witness minimal volatility. However, this was not the case for March. The Fed Chair, Jerome Powell, told journalists that the economy is stronger than many seem to think and that the Middle East crisis is likely to trigger short-term higher inflation.
These two comments alone indicate that the Federal Reserve is not likely to easily consider cutting interest rates in the near future. When monitoring the FedWatch Tool, before the press conference, 60% of market participants were expecting the Fed to have cut on one occasion in 2026. Now the tool indicates that there is a 60% chance of no cut at all.
According to the Federal Reserve, inflation is still a problem: Powell said inflation remains above the target of the central bank. In the Fed’s projections, total PCE inflation is seen at 2.7% this year, with core PCE around 3.0% in February. Though Mr Powell stressed that developments in the Middle East are uncertain for the US economy and inflation, but will certainly trigger inflation in the short term, unless the conflict lasts longer than previous expectations.
In this context, two factors are vital for investors: the short term and whether the conflict lasts longer than expected. For this reason, investors are pricing in additional risk as the conflict has already lasted longer than previously expected.
HFM - NASDAQ Chart
The NASDAQ and the stock market continue to trade within the recurring price range, but with a slight bearish bias. The issue for the stock market is that higher energy prices are likely to trigger lower consumer sentiment. At the same time, consumers are not likely to obtain relief from lower interest rates. As a result, the stock market looks less attractive to investors, particularly as the US Dollar also performs well.
However, JP Morgan strategists advise they do not expect the NASDAQ to fall below $23,900 under the current market conditions. According to JP Morgan, in order for the NASDAQ to see a decline below this level inflation would have to rise significantly and the conflict would have to escalate. Nevertheless, trend and momentum-based indicators continue to point towards a downward trend.
The best performing currencies of the day so far are the Japanese Yen and US Dollar, while the worst performing is the Pound. For this reason, the GBPUSD shows less conflict and resilience as the price falls.
The main price driver for the US Dollar is the more hawkish central bank and expectations of a higher inflation rate. As institutions change their expectations for monetary policy, so does the pricing of the Dollar. For example, analysts at Goldman Sachs anticipated a 25-basis-point adjustment in September and December. However, they now only expect one cut in December 2026.
The Dollar's upward trend is also in line with market correlations such as the decline in Gold and Silver. For this reason, the price movement is potentially validated. However, the Pound is also likely to experience higher volatility when the Bank of England also confirms its own rate decision and view on market conditions.
- Fed signals fewer rate cuts, strengthening the US Dollar and pressuring Gold and equities.
- Markets turned risk-off as Powell warned stronger growth may keep inflation elevated.
- Higher energy prices and delayed rate cuts are weighing on stock market sentiment.
- Dollar strength may potentially continue as markets price a more hawkish Fed outlook.
Please note that times displayed based on local time zone and are from time of writing this report.
Click HERE to access the full HFM Economic calendar.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!
Click HERE to READ more Market news.
Michalis Efthymiou
HFMarkets
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
