The Fed could proceed to more aggressive half-basis-point rate hikes to combat inflation
Wall Street stocks finished marginally lower on Monday as the major indexes had to give up some gains after a hawkish message from Powell. The Fed chair said the central bank could proceed to more aggressive half-basis-point rate hikes in order to fight the elevated inflation. As such, the Dow Jones shed 0.6%, the Nasdaq Composite gave up 0.4%, and the S&P finished just below the flat-line, refraining from losses as energy stocks rose along with oil prices. Meanwhile, shares of the tech sector fell as 10-year US Treasury yields climbed to top 2.3%.
Asian equities gained on Tuesday despite Powell’s more hawkish tone on monetary policy. Japan’s Nikkei 225 added 1.5% amid a weaker yen that bolsters the outlook for exporters. South Korean Kospi advanced 0.89%, China’s Shanghai Composite added 0.19% and Australia’s S&P/ASX 200 edged up 0.86%. On the geopolitical front, peace talks between Russia and Ukraine fail to make substantial progress on key issues, thus capping gains in stocks globally. European equities opened mildly higher today while US stock index futures are pointing lower, suggesting risk trades remain unstable.
Meanwhile, the dollar received a boost from Powell as the Fed governor opened the door for 50 bps rate hikes in the coming FOMC meetings, thus pushing US Treasury yields north. Against this backdrop, EURUSD extended the recent retreat, falling for the third consecutive day on Tuesday. After failure to break above the descending 20-DMA, the common currency derailed the 1.1000 figure to register nearly one-week lows around 1.0960. The USD index itself peaked just below the 99.00 figure earlier in the day before retreating marginally in recent trading.
Elsewhere, bitcoin derived support from the 20-DMA on Tuesday and rallied to early-March highs on Tuesday. The BTCUSD pair rose to $43,300 before retreating below $43,000 while staying upbeat slightly above the descending 100-DMA. Now that the coin saw another bounce from the $40,000 psychological level, the prices could target the $45,000 figure next. However, it looks like the bullish momentum remains unsustainable at this stage, with downside risks persisting both in the short- and medium term.