Fed plans further tightening of monetary policy - 6.4.2022

Today, the US dollar index has been rising for the 5th day in a row. It hit a new high since May 2020. The catalyst for this positive trend was the good macroeconomic data published at the end of last week: United States Gross Domestic Product (+6.9% q/q in 4Q 2021) and Nonfarm Payrolls (+431 thousand in March). Yesterday ISM Non-Manufacturing PMI for March was released in the US. It rose to 58.3 points from 56.5 points in February. Yesterday the Reserve Bank of Australia met. He kept the rate at 0.1%, but this did not prevent the strengthening of the Australian dollar. Recall that inflation in Australia is 3.5% y / y according to the data for the 4th quarter of 2021. The euro exchange rate has been declining for the 5th day in a row today. In addition to the risks of a military conflict in Ukraine, the presidential elections in France added to the negative. Investors fear a victory for right-wing candidate Marine Le Pen. According to polls, she ranks 2nd behind the incumbent President of France Emmanuel Macron.

Bitcoin slightly declines for the 3rd day in a row. Investors reacted negatively to the decision of the United States Securities and Exchange Commission (SEC) to reject the application for the creation of another ETF fund based on bitcoins - ARK 21 Shares. The Central Bank of Russia refused to soften the conditions for the circulation and mining of cryptocurrency in Russia, calling bitcoin a financial pyramid. Recall that in February, Bloomberg estimated the amount of cryptocurrency held by Russian players at $214 billion.

Yesterday the US stock indexes went down. The main reason for this was the U.S. Federal Reserve Governor Lael Brainard and San Francisco Fed President Mary Daly on the need to raise the rate (0.5%) and tighten monetary policy. According to CME FedWatch, the probability of a rate increase at the May 4 meeting, immediately by 0.5% to 1%, has now reached 76.7%. Whereas on March 1 it was only 27%. An increase in the Fed's rate may increase the credit burden of US corporations. Yesterday, the fall leaders were the sectoral indices Dow Jones Technology and Consumer Goods. They are down about 2%. The leaders of the fall were also Boeing (-4.5%) and Intel (-2.1%). They may suffer from anti-Russian sanctions related to air travel and equipment supplies. The growth leaders were the shares of the social network Twitter (+2%), which invited Elon Musk (the founder of Tesla) to its board of directors. Futures for US stock indices are now trading lower. Investors are waiting for the publication of the materials of the March meeting of the Federal Open Market Committee (FOMC) Minutes. The publication of corporate reports for the 1st quarter of 2022 will begin next week in the United States. Refinitiv expects S&P 500 earnings to rise 6.4%. Note that the S&P 500 itself rose by 12% over the year.

On Tuesday, oil quotes fell slightly. This was due to the message of the American Petroleum Institute on the increase in oil reserves in the US for the week by 1.08 million barrels. However, this morning oil is getting more expensive as economic sanctions could reduce its production in Russia. U.S. West Texas Intermediate (WTI) failed to break down the psychological support level of $100 per barrel. Natural gas in the US has risen in price by 15% over the week due to increased production and exports of liquefied natural gas (LNG) to Europe. Earlier, the European Union limited purchases of Russian pipeline gas under sanctions and is now replacing it with American LNG.