03.05.202207:05 Forex Analysis & Reviews: Ukraine-Russia conflict, day 69

Major US stock market indices, such as Dow Jones, NASDAQ and S&P 500, closed Friday and Monday with new declines. NASDAQ and S&P 500 indices hit their local lows. Therefore, we can confidently state that correction in the stock market continues and it can last for a very long time. This week the Fed will meet to raise interest rates by 0.5%. A week ago, there was even talk of 0.75%. However, the latest US GDP report for the first quarter will force the FOMC members to temper their fervour a little. Notably, according to this report the US economy will shrink in the first quarter by 1.4% q/q. Of course, this value is not yet final and a second and third estimate could show a better result. However, after a rise last quarter, the fall looks rather strange. In the US there is talk of an imminent recession, although there is a much better chance of a recession in the UK or the EU. However, it can be said that the potential for a recession is everywhere. High inflation has to be dealt with, but the less growth a particular economy shows, the less scope the central bank has to raise the rate. After all, any rate hike or reduction in the balance sheet is a tightening of monetary policy. This tightening leads to a slowdown in the economy. In short, there is now a dilemma for many central banks around the world: high inflation or economic growth.The conflict in Ukraine has now lasted for 69 days. There has been little or no really important news over the past few weeks. Already today in the US, Joe Biden is due to sign the Lend-Lease legislation for Ukraine. In the course of this week, the European Union is due to formalise a sixth package of sanctions against Russia, which could include restrictions on oil imports. The first news will mean that the number of arms deliveries to Ukraine from Western countries will increase. The second news will mean that Russia's economy will be hit again. The Kremlin itself refused to supply hydrocarbons to Poland and Bulgaria because these countries refused to settle accounts in roubles, as Vladimir Putin demanded. The oil and gas embargo itself is almost inevitable, because the sanctions are imposed to stop Russian aggression in Ukraine. Since there is no sign of the end of the military conflict now, and the negotiations are officially considered to be over with no result, sanctions will be imposed until they cover absolutely all business and economic relations and bring them to naught. Both the EU and Russia seem to be ready for this.