Financial markets are likely beginning to ride a wave of fear that interest rates will be raised quickly, which could increase borrowing costs and could make it more expensive to raise dollars.
The downward wave seems to be sweeping through both the stock, commodity and cryptocurrency markets all at the same time. It's been a long time since we've seen every asset class inflicted with a single day of losses, except for the US dollar and US bonds. Already last week, especially on Friday, the situation in the financial markets seemed very tense. U.S. stock indexes seemed to be falling by nearly 3 percent, and today we could see a potential continuation of this downward wave. Before noon, contracts in the United States seem to have lost about 1 percent. Meanwhile, in Europe, the scale of falls seems to be greater, as the German DAX falls by almost 2 percent, and the Euro Stoxx 50 by more than 2.5 percent.
Declines in stock prices may also be accompanied by declines in commodity prices. The price of a barrel of WTI crude oil is down almost 5 percent today, to around $97. As a result, the price may reach its lowest level in nearly two weeks amid growing concerns that prolonged restrictions in China and sharp interest rate hikes in the U.S. will have a negative impact on global economic growth and fuel demand. Monday's declines extended last week's decline in U.S. crude as demand concerns outweighed worries about limited global supply. Demand for gasoline, diesel and jet fuel in China in April is expected to fall 20 percent year-on-year, Bloomberg reported, equivalent to a drop in oil consumption of about 1.2 million barrels a day. On top of that, fears of a global economic slowdown or stagflation could also weigh on oil prices.
With high expectations for Fed action, the US dollar seems to be gaining in value. The EUR/USD exchange rate could thus fall to levels last seen in March 2020, approaching 1.07. The entire US Dollar Index could remain above the 100-point level.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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