Fed meets, Powell to pluck some doves' wings to calm joy [Video]

Ipek Ozkardeskaya Swissquote Bank Ltd

Stock investors kicked off the week on a cautious note, as the Federal Reserve (Fed) is expected to kill joy when it announced its latest decision tomorrow, and earnings announcements may not save the day.

The S&P500 gave back 1.30% on Monday. US crude fell 2% yesterday and slipped below the 50-DMA this morning.

Interestingly, however, the latest news on the macro front is not bad. The Chinese reopening is now well reflected through the first set of economic data. Released today, both the manufacturing and services PMI jumped into the expansion zone.

And the cherry on top, the IMF raised its growth forecast for this year by 0.2% to 2.9% citing the resilience of US spending and the Chinese reopening.

This is the kind of news that the energy markets normally cheer. But not this time, apparently.

In the FX, the US dollar is gaining some positive momentum into the Fed meeting, as investors know that the Fed won’t declare victory over inflation despite the falling inflation, and position accordingly.

The Fed will certainly hike by 25bp, but there is little chance it will announce the end of the tightening. But more importantly, Jerome Powell will likely reveal whether we have one more rate hike, or two more rate hikes to go before pause.

And that simple ‘s’ could make all the difference.

Author

Ipek Ozkardeskaya

Swissquote Bank Ltd

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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