Market Highlight 31.03.2026

Federal Reserve Chairman J. Powell said last night that disruptions to energy supply are often short-lived, but warned that the Central Bank cannot afford to be complacent after several years of elevated inflation. Monetary policy itself takes time to transmit through the economy, making it difficult to respond immediately to an energy price shock. However, he also highlighted an important point: inflation in the U.S has remained above the 2% target for 5 consecutive years, leaving households and businesses highly sensitive to another round of price increases. This creates a difficult situation for the Federal Reserve, as an energy shock could simultaneously push prices higher while dragging down economic growth by squeezing household budgets and raising costs for businesses. Policymakers are therefore forced to weigh whether to prioritize fighting inflation or supporting growth, fully aware that the conventional tools used to address one problem may end up worsening the other. Powell’s term as FED Chair will end on 15/5, while the U.S Congress has yet to schedule a confirmation hearing for Kevin Warsh, the former FED Governor chosen by President D. Trump in January to succeed him.

The USD Index rose 0,3% yesterday to 100,5, supported by safe-haven demand triggered by the war, while the U.S is also in a relatively stronger position than many other countries as a net energy exporter. The market is no longer pricing in further FED rate cuts in 2026, while the possibility of another rate hike is becoming increasingly tangible as the conflict in Iran shows no sign of easing. Domestically, interbank USD/VND edged higher again yesterday and closed the session at 26.345.

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