World markets continue to be under strong pressure, so stock indices in Europe and the US fell further. Commodity markets were no better as there were sharp sell-offs last week.
Earlier, the Fed raised its interest rate by 0.50% to 1.00%, but Fed Chairman Jerome Powell assured that there will no longer be more aggressive hikes in the next meetings, so markets started to normalize. However, by the end of the week, stock markets collapsed because of the COVID-19 problems in China, high inflation in Europe and the United States, and fears that the global economy will still fall into a deep recession amid the continuation of rate hikes by the Fed and the ECB.
As for the forex market, trading was quite calm, with dollar gradually strengthening against other major currencies. The USD index even closed almost unchanged after a volatile trading session and amid a decline in treasury yields. This calm dynamics can be explained by the upcoming reports on Wednesday, namely the inflation data in Germany and the US. According to the forecasts, inflation in Germany is expected to stabilize around 7.4% y/y, while the US will show a sharp decline to 8.1% y/y and to 0.2% m/m.
These data will certainly affect investor sentiment, as well as serve as a reason for the Fed not to raise interest rates on its next meetings. If that really happens, stock indices will bounce back, while demand for dollar will weaken. Treasury yields will also see a correction, while commodity markets will rally.
