The Fed may frame its rate hike in hawkish terms, boosting the US currency across the board
US stock indices closed lower on Tuesday amid rising worries about a looming Federal Reserve decision, with big-tech earnings adding to nervousness among investors. The Dow Jones Industrial Average fell 0.7%, its largest one-day percentage decline in nearly a month. The S&P 500 shed 1.15% and the Nasdaq Composite lost 1.87%, ending lower for third straight session. Sentiment on Wall Street was pressured by Walmart as the retailer cut its profit outlook, citing elevated inflation. The company’s shares fell 7.64% overnight, dragging other retailers down.
Asian equity markets followed Wall Street lower ahead of the Fed decision. The central bank is expected to raise interest rates by 0.75%, with investors worrying that aggressive action against inflation by central banks might derail global economic growth. The Shanghai Composite Index in China lost 0.16% while Tokyo’s Nikkei 225 bucked the trend to advance 0.22%. The Hang Seng in Hong Kong sank 1.43% and Sydney’s S&P-ASX 200 erased early losses to finish 0.23% higher.
In Europe, equities saw a cautiously positive start on Wednesday, with market participants looking ahead to the monetary policy decision from the Federal Reserve. Capping gains in the markets, the International Monetary Fund cut its global growth projections for 2022 and 2023 on Tuesday. The Fund now expects the global economy to grow 3.2% this year, before slowing further to a 2.9% GDP rate in 2023. Elsewhere, the chief of Germany’s gas regulator warned that consumers must prepare for more energy price increases.
Meanwhile, the USD index rose the most in 12 days to exceed the 107.00 figure on Tuesday. The greenback thus turned positive on the weekly charts, albeit struggles to extend the ascent today as traders turned more cautious ahead of the Fed’s verdict. The Fed may frame its rate hike in hawkish terms, boosting the US currency across the board. In this scenario, the index could get back above the 107.60 zone that represents the intermediate barrier on the way towards the 108.00 level last seen ten days ago.