Today the Federal Reserve will announce its interest rate decision and publish its monetary policy minutes. Wall Street has a broad consensus that the central bank will raise the benchmark interest rate by 50 basis points to reduce rising inflationary pressures. This would be the second adjustment during the current tightening cycle but the first non-standard increase since early 2000. But this will not surprise the market since the March FOMC meeting minutes showed that "many participants would prefer a 50 basis point hike." Special attention should be paid to the press conference at which Jerome Powell will talk about the future outlook for the economy. If the future outlook is unfavorable, the dollar index may see a new upward momentum while the stock market decreases. If the outlook is favorable, the dollar index could fall sharply, and the stock market could jump as a negative scenario already in prices.
Analysts also expect the FOMC Committee to plan a 50 bps hike at its next meetings to combat inflation. And that will probably be enough to contain market prices and support the dollar. Policymakers are also expected to announce a plan to officially begin quantitative tightening. The Fed will formally announce quantitative tightening (QT), consisting of a three-month phase-in period and limits of $60 billion in US Treasuries (USTs) and $35 billion in mortgage-backed securities (MBSs), effectively cutting the Fed's balance sheet by $670 billion this year.
At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 0.20%, the S&P 500 Index (US500) added 0.48%, and the NASDAQ Technology Index (US100) gained 0.22%.
AMD released its first-quarter results on Tuesday that exceeded analysts' expectations. AMD shares jumped more than 7% in the post-market session.
Major European indices closed yesterday in the green zone. German DAX (DE30) gained 0.72%, French CAC 40 (FR40) added 0.79%, Spanish IBEX 35 (ES35) jumped by 1.83%, British FTSE 100 (UK100) increased by 0.22%. The producer price index, which shows the inflation level between plants and factories, jumped by 5.5% month on month in Europe. As a rule, the growth of this index is further accompanied by a rise in consumer goods prices. Due to strong inflationary pressures, the ECB sees a possible interest rate hike as early as July. The unemployment rate in the Eurozone decreased from 6.9% to 6.8%.
BP shares jumped more than 5% after the UK's largest oil company reported quarterly results that beat expectations.
The API reported yesterday that US crude oil and refined products inventories, including gasoline, fell more than expected last week. Oil prices fell more than 2% on Tuesday as demand worries over a prolonged quarantine in China over COVID-19 outweighed the prospect of a European embargo on Russian oil. The OPEC+ meeting will take place tomorrow. The Organization of the Petroleum Exporting Countries and their allies are likely to stick to their production plans. However, the group underperformed its production targets from October to March, except for February. Many experts believe that OPEC+ countries will benefit from a supply shortage in the market.
Asian stock markets traded without a single trend yesterday. The Japanese market was closed yesterday, Hong Kong's Hang Seng (HK50) added 0.06%, and Australia's S&P/ASX 200 (AU200) fell 0.42%. Beijing is massively testing residents to prevent a lockdown similar to the one in Shanghai last month. The capital's restaurants were closed.
New Zealand has published its financial stability report. According to the report, New Zealand's financial system still had good opportunities to support the economy. The withdrawal of monetary stimulus in the near term will reduce the need for tightening in the future and help contain financial stability risks. But Russia's invasion of Ukraine poses risks to financial stability. While direct trade risks are limited, commodity prices have risen, increasing the risk that long-term inflation expectations will rise. If interest rates rise more than expected, it could soften the labor market over time, posing a risk to households' ability to service their mortgages.
Main market quotes:
S&P 500 (F) (US500) 4,175.48 +20.10 (+0.48%)
Dow Jones (US30) 33,128.79 +67.29 (+0.20%)
DAX (DE40) 14,039.47 +100.40 (+0.72%)
FTSE 100 (UK100) 7,561.33 +16.78 (+0.22%)
USD Index 103.48 -0.26 (-0.25%)
- – New Zealand RBNZ Financial Stability Report at 00:00 (GMT+3);
- – New Zealand Unemployment Rate at 01:45 (GMT+3);
- – New Zealand RBNZ Press Conference at 02:00 (GMT+3);
- – Australia Retail Sales (m/m) at 04:30 (GMT+3);
- – German Services PMI (m/m) at 10:55 (GMT+3);
- – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
- – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
- – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
- – US ISM Services PMI (m/m) at 17:00 (GMT+3);
- – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
- – US FOMC Statement at 21:00 (GMT+3);
- – US Fed Interest Rate Decision at 21:00 (GMT+3);
- – US FOMC Press Conference at 21:30 (GMT+3).
by , 2022.05.04
We advise you to get acquainted with the daily forecasts for the major currency pairs.This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
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