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MTrading Team • 2022-04-07

Markets watch FOMC Minutes intensifying risk aversion

Markets watch FOMC Minutes intensifying risk aversion

Global markets witnessed another risk-off day on Wednesday, as well as during early Thursday. Wall Street benchmarks dropped for the second consecutive day as Ukraine-linked geopolitical woes joined the hawkish FOMC Minutes. 

Stocks in Asia-Pacific remained in the red even as the IMF supported the BOJ’s easy money policies, the reason could be linked to the Washington-based organization’s fears of more pain to Japan’s economy due to Kyiv’s invasion. However, equities in Europe are a bit firmer during the initial hour.

The US dollar retreats from a multi-day high but prices of gold failed to improve. Brent oil, on the other hand, rebounds from a three-week low.

Cryptocurrencies slumped the most in a month the previous day as riskier assets lost ground after Fed policymakers unanimously backed faster rate-hike and balance-sheet normalization, per the latest FOMC Minutes. Adding to the BTC and ETH woes was news relating to Hydra and Garantex.

Following is the detailed performance report of the key financial assets:

  • BRENT OIL snaps two-day downtrend while defending $102.00 rate.
  • GOLD remains lackluster at around $1,925.
  • USD INDEX retreats from 23-month high with the latest rate being $99.60.
  • DOW JONES, NASDAQ and S&P 500 all remained on the back foot.
  • DAX rises 0.50% reaching 14,170 rate whereas FTSE 100 reaches 7,560 level, down 0.40% intraday.
  • BTC/USD recovers to $47,480, ETH/USD gains 1.80% to $3,225 rate.
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More sanctions, tighter monetary policies increase traders’ pain

Market sentiment soured further on Wednesday as the Western economic leaders showed readiness to levy extra harsh sanctions on Russia. The risk-off mood also got support from the latest FOMC Minutes suggesting the participants’ support to ‘expeditiously’ move policy towards neutral. The difference between the US and Iran over the nuclear deal and China’s covid woes, as well as the International Monetary Fund’s (IMF) grim outlook for Japan, also weighed on the risk appetite.

While fears of tighter monetary policies propelled yields and drowned equities, the US dollar was on the benefitting side, which in turn weighed on gold prices before the latest stabilization. Crude prices, however, rebound amid the Western embargo on Russian oil, as well as a deadlock over the US-Iran deal to unlock more energy output.

Firmer sentiment also drowned BTC and ETH towards posting the biggest daily slump in a month. The selling pressure in cryptos also took clues from the news that servers of the darknet resource Hydra were arrested, as well as sanctions against the Garantex crypto exchange.

Fears keep safe-havens on the buyer’s radar:

⏫ 🟢 Strong buy: DAX, FTSE 100

⏬ 🔴 Strong sell: DOW JONES, S&P 500

⬆️ 🟢 Buy: USD Index, ETH/USD, Nasdaq

⬇️ 🔴 Sell: Brent oil, Silver, Gold, BTC/USD

Fewer releases on the docket can extend downbeat markets

Given the mostly light economic calendar ahead, with Eurozone Retail Sales and Canadian jobs report being top-tier, global markets are likely to remain downbeat for the rest of the week.

This in turn favors the traditional safe havens like the US dollar. The same could weigh on the gold prices while the Japanese yen may remain weak amid firmer yields and economic challenges.

On the other hand, equities and cryptocurrencies could rebound in a case where talks over the Russia-Ukraine truce spread faster.

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