22.03.202208:49 Forex Analysis & Reviews: US stock market steadies even despite Powell's aggressive rhetoric

S&P500

The US market declined moderately at the opening of the week as the Fed started its monetary tightening.

Major US indices moved slightly lower on Monday: the Dow -0.6%, NASDAQ -0.4%, and S&P500 -0.1%.

Japan's main index Nikkei 225 rose on Tuesday by 1.4%.

Energy: Oil continues its uptrend, gaining 3% on Tuesday. Brent is trading at $119 per barrel. Oil prices are moving higher as the EU may consider a complete ban on oil imports from Russia due to the conflict in Ukraine. Yesterday, Russian Deputy Prime Minister Alexander Novak warned that global oil prices could hit $300 per barrel in the event of an import ban.

Russian market: Yesterday, the Moscow Exchange reopened the trading in Russian government bonds (OFZ). The stock market is still closed. On Tuesday, the US dollar and the euro stabilized against the ruble at 103 and 117 respectively.

S&P 500 – 4,461, trading range 4,420 – 4,500

On Monday, Fed Chairman Powell said that the Fed was ready to raise the rate by 0.5%, 2 times faster than previously expected. He stressed that high inflation required faster and tougher action by the Fed. Surprisingly, this statement did not cause any sharp reaction in the market: it showed just a slight decline after strong growth last week. The market is still set for growth.

Fitch Ratings has significantly cut its world GDP growth forecast for 2022 to 3.5% from 4.2%. The main reason is the conflict in Ukraine.

About the conflict: not much has changed in terms of negotiations on both sides, and today is the 27th day of the conflict. Yesterday, there was another attempt to continue negotiations but the two parties failed to agree on some key aspects. On March 24, Western countries will discuss their plans regarding Russia at the NATO, EU, and G7 summits. Yesterday, for example, the Hungarian authorities announced that they were going to block all restrictive measures against Moscow, including a ban on gas supplies, closing the airspace over Ukraine, and deploying EU peacekeeping troops to protect civilians.

Three main topics that are holding investors' attention today include the conflict in Ukraine, rising oil and wheat prices, and the tightening of the Fed's policy. Next time, the US regulator is expected to raise the rate by 0.5%.

USDX - 98.80, trading range 98.50 - 99.10.

The US dollar rose after Jerome Powell announced a rate hike of 0.5%. However, its upside potential is limited as the USDX is still holding below the highs of March 7.

USD/CAD - 1.2600, trading range 1.2500 - 1.2700.

The pair stopped falling yesterday thanks to a stronger US dollar. Yet, the oil rally is putting strong downward pressure on the pair. A new round of decline is quite possible.

Conclusion: The US market is set to move higher and waiting for the conflict de-escalation in Ukraine.