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Global Financial Markets Are Still Affected By Fed’s Forecasts

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Fundamental analysis of Forex market

The US stock market closed in the red zone on Friday. The S&P 500 index decreased by 1.31%, the NASDAQ lost 0.94%, and the Dow Jones fell by 1.58%. Over the weekend, James Ballard, the head of St. Louis Federal Reserve Bank (FRB), told CNBC that the Fed could raise its key rate as early as the end of 2022. Many investors fear that if the Fed starts to tighten policy sooner, further economic growth could be limited. But as long as monetary policy remains unchanged, indexes are expected to rise further until August. At the moment, the biggest attention of traders is concentrated on the NASDAQ index, which is behaving more confidently.

European stock indices also closed with a decline on Friday. The German DAX lost 1.78%, it’s the biggest daily decline in the last 2 months. The British FTSE 100 also fell to its monthly low, decreasing by 1.9%. Regional elections were held in France on the weekend. The voter turnout was extremely low. According to exit polls, the party of incumbent French President Emmanuel Macron took only 5th place.

Oil is rising again after falling on Thursday. Iran held governor elections last week, where the current president Hassan Rouhani lost his seat to Ibrahim Raisi, who is a supporter of harsh criticism of the West, and in particular, the United States. Raisi will take office in early August. The nuclear deal is under the threat of a breakdown, but Rouhani is trying his best to reopen negotiations and finalize the deal before leaving office.

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As US Treasury yields stopped rising, the plunge in gold and silver came to a halt. Experts believe that the rise in yields was temporary and triggered by excess dollar liquidity, Treasury bond yields will fall, so gold, as the contrary instrument, will rise. Thus, there are good buying opportunities for investors now.

Asian stock markets are also falling. Japan’s Nikkei is down 3.3%, falling below 28,000 for the first time in a month. Australia’s ASX200 is down 1.81% in today’s trading session. The situation in the Asian market is now highly dependent on the movement of US indices. The People’s Bank of China kept the benchmark annual interest rate unchanged at 3.85%.

Main market quotes:

  • S&P 500 (F) 4,166.45 -55.41 (-1.31%)
  • Dow Jones 33,290.08 -533.37 (-1.58%)
  • DAX 15,448.04 -279.63 (-1.78%)
  • FTSE 100 7,017.47 -135.96 (-1.90%)
  • USD Index 92.32 +0.43 (+0.47%)

Important events:

  • Australia Retail Sales (m/m) at 04:30 (GMT+3);
  • China PBoC Loan Prime Rate at 04:30 (GMT+3);
  • ECB President Christine Lagarde Speaks at 17:15 (GMT+3).