So, we are witnessing yet another day of wild moves in the markets. Initially it was the continuation of the rally from the day before insofar as the stock markets are concerned, before markets turned volatile – although the major indices were holding onto to the bulk of their impressive gains at the time of writing. Uncertainty and confusion remains high, as investors look ahead to the Fed meeting later on.
Sentiment has been boosted because there are renewed hopes over a deal to end the conflict in Ukraine, while in China the government made a strong vow to ease regulatory crackdowns, something which sent Chinese and Hong Kong stocks, as well as U.S.-listed Chinese shares, surging.
- Earlier, the FT reported that Ukraine and Russia are working on a "15-point" peace plan.
- But Ukraine’s president spokesman Mihailo Podolyak in a tweet said that "the FT published a draft, which represents the requesting position of the Russian side. Nothing more. The side has its own positions. The only thing we confirm at this stage is a ceasefire, withdrawal of Russian troops and security guarantees from a number of countries"
- Kremlin had also said that creating a demilitarised Ukraine like Austria with its own army could be seen as a compromise.
Let’s see if talks will yield any real results, but the market has made up its mind, judging by the big stock market gains today.
Away from geopolitics, it is all about the Fed today. A 25 basis point hike is almost certain. The question is whether we will see a surprise 50 basis point hike or not, and how many more hikes will the FOMC signal for the rest of the year. The current market expectations are 7 in total for 2022. That’s one 25 basis point hike per meeting.
If the Fed proves to be more hawkish than the above expectations, we should see the dollar rally and gold drop, while if it merely meets those expectations, or is a bit more dovish, then gold should be able to regain some of its poise.
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