Markets still on Fed policy watch, amid heightened geopolitical risks

Markets will be looking to the incoming FOMC minutes and US CPI data for more signals on the Fed policy outlook. Should either release serve up yet another jarring reminder of the Fed’s “higher for longer” intentions, that may force stocks to pare recent gains and dollar to resume its uptrend.

Despite the risk-on mood seen in recent sessions, driven by a paring of the surge in yields and Fed rate hike bets, investors will still have to keep a watchful eye over heightened geopolitical risks. Global equities may yet show a larger reaction to the ongoing Middle East conflict if it threatens to ramp up oil prices and further darken the global economic outlook, while forcing major central banks to veer off their “higher-for- longer” course.

The still fluid situation continues to warrant vigilance among market participants, who could trigger heightened volatility as a knee-jerk reaction to fresh headlines and developments in the region.