Should the central bank refrain from emphasizing more aggressive hiking, it could be interpreted as dovish
Wall Street stocks finished slightly higher on Tuesday, with investors turning more cautious ahead of the Fed decision due later today. The Dow Jones and the Nasdaq Composite gained 0.2% each, while the S&P 500 advanced 0.5%. The Federal Reserve is widely expected to raise interest rates by 50 basis points. Market participants are wondering if the central bank expresses an even more hawkish tone when commenting on the outlook for further tightening. Should the Fed refrain from emphasizing more aggressive hiking, it could be interpreted as dovish.
In this scenario, the dollar will have to give up some of its recent gains as the USD bulls would be disappointed by a cautious tone by the bank. The USD index has retreated marginally from multi-year highs seen last week just below the 104.00 mark. Should the pressure intensify in the near term, the buck may challenge the 102.80 support zone, followed by the 102.30 area. In a bullish scenario, the USD index could easily overcome the 104.00 mark last seen in 2003.
Asian equity markets were mostly lower on Wednesday, with Hong Kong’s Hang Seng leading the losses. The index gave up 1.11% ahead of the closing bell as Alibaba stocks plunged 3.8% while shares of Tencent lost 3.2%. Chinese and Japanese markets remain closed for a holiday. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.46%. US stock index futures are trading marginally higher in early pre-market deals.
In Europe, stocks opened little changed on Wednesday. The pan-European Stoxx 600 slid 0.2% in early trade. On the data front, Eurozone’s April final services PMI came in at 57.7, in line with the preliminary estimate. Elsewhere, The European Commission President, Ursula von der Leyen, announced the sixth round of sanctions against Russia.
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