Fed remains hawkish and markets tumble as the Federal Reserve’s stance continues to weigh on global markets, strengthening the USD and pressuring risk assets. With inflation concerns persisting and expectations for prolonged higher interest rates building, investor sentiment has shifted toward a risk-off tone, impacting equities, commodities, and cryptocurrencies alike.
USD supported by the Fed’s hawkishness
Maybe the main market movement in the FX market was the strengthening of the USD. The Fed remained on hold as was expected yet sounded more hawkish than the market may have been anticipating. The Fed’s interest rate decision citing a persistence of inflationary pressures provided support for the USD. Today we note the release of BoE’s and ECB’s interest rate decisions. Both banks are expected to remain on hold, yet hawkish tendencies may emerge, given worries for inflationary pressures.
Xcellence Research Team opinion
Should market expectations for the Fed to keep rates high for longer be enhanced, the USD may strengthen further. Also should ECB and BoE sound hawkish, beyond market expectations, we may see the EUR and GBP getting some support.
Oil prices get another push higher
Oil prices got another push higher yesterday as the war in Iran escalated further. Iranian gas field South Pars was hit yesterday and the Iranians replied with an attack on Qatari LNG facilities. The escalation enhanced market worries for the supply side of the oil market. On the other hand, we note that US President Trump, seems to be trying to de-escalate the situation.
Xlence Research Team opinion
Should we see worries for a tightening of the oil market being enhanced, we oil prices could get more support. Should market worries ease we may see oil prices losing some ground.
US equities on the retreat
US equities were on the retreat yesterday, sharply. The Fed’s hawkishness as expressed in its interest rate decision weighed on the market sentiment. Market worries intensified further as February’s US PPI rates accelerated beyond market expectations. The release of the PPI rates flagged the prospect of higher inflationary pressures in the US economy. Overall, the prospect of the Fed’s rates remaining high for longer disappointed equity market investors.
Xlence Research Team opinion
We maintain a bearish outlook for US stock-markets for the time being. We may see the bearish tendencies intensifying should the market sentiment turning increasingly risk-off.
Bitcoin bulls hesitate
The Fed’s hawkishness turned crypto buyers away yesterday as the risk off sentiment sparked a divestment in the crypto market. From a different angle, the Fed’s hawkishness also weighed on gold’s price, given also the strengthening of the USD. It’s characteristic of the current situation in the market that safe haven flows didn’t go to gold, but to the USD yesterday.
Xlence Research Team opinion
We still maintain a bearish outlook for both of the prementioned trading instruments. Nevertheless the fundamentals affecting them diverge substantially. For Bitcoin’s bearish movement to continue, given it riskier nature, we would require an intensification of the market’s risk-off sentiment. For gold’s downward motion to be maintained, market expectations for the Fed’s monetary policy easing, have to dwindle further.
Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication.
