Daily market commentary: It is expected that the US central bank will hike interest rates


The US dollar index is dropping during early Wednesday trading. The index, which measures the performance of the greenback against a basket of other major currencies, hedged down from the weekly highs reached on Monday, but remains supported above the 98 points level, ahead of the Federal Reserve’s decision on interest rates, which will come out later today. It is widely expected that the US central bank will hike interest rates for the first time since 2018, with the consensus pointing at a 25bp rise. Much attention will also be paid to what the Fed’s chairman says at the end of the meeting, and to the tone in which it is said, with investors looking for clues on the timing and pace of future hikes. The Fed must contend with inflation, but also with growing geopolitical instability and a looming energy crisis, which threaten economic growth prospects; against such a backdrop, the markets will be watching how the central bank manages to balance the tightening required to control inflation against the need to be measured in order to avoid precipitating an economic contraction.

Ricardo Evangelista – Senior Analyst, ActivTrades

European Shares

European shares jumped at market open on Wednesday, alongside Asian equities, and US Futures contracts, amid improving global market sentiment. The “risk-on” trading stance is back on track everywhere, and market panic is clearly fading as investors digest the latest positive macro developments brought by both China and Russia/Ukraine diplomatic talks. The strong dovish stance China is adopting in response to concerns over its property sectors and economic growth has been widely welcomed by investors who seized this occasion to increase their exposure to the region’s shares. Elsewhere, despite “difficult” ongoing negotiations between Russia and Ukraine, traders were happy to witness President Zelensky be ready for compromises to bring the war to an end by reaching an agreement. However, all eyes will be on the other side of the Atlantic today with a key FOMC meeting looming later in the evening. While a quarter basis point rate hike from the FED is expected by almost everyone today, investors still lack clarity on the mid-term outlook as lingering uncertainties brought by the Russian invasion of Ukraine may dent some of the initial projections made by Jerome Powell. That said, Investors are likely to pay a close attention to the wording Chairman Powell will use in his press conference, which may cause higher market volatility at the end of the day.

Pierre Veyret– Technical analyst, ActivTrades

Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.


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