Last week in a speech for the IMF, the FED Chairman Powell confirmed the market expectation for a 0.50% rate hike for the meeting in May. As a result of Chairman Powell’s speech, the stock market plunged, and the USD exploded to the upside. That was somewhat a surprising reaction from the markets since it has been well known that a 0.50% rate hike is coming. Perhaps the markets were reacting to the more hawkish tone coming from the Chairman Powell and members of the Federal Open Market Committee and the fact that the FED may have to be much more aggressive and increase the US interest rate with another 0.50% hike in the meeting in June 2022.
The Federal Reserve is pressed in the corner they waited too long and they didn’t take the necessary steps to tackle the skyrocketing inflation and now they have to choose between crippling the economy or high inflation. Imagine if the FED needs to go from the current 0.50% interest rate to +4.00%, how many households in the USA will have problems paying their mortgages.
On top of all that we have a shut down in China, because of COV19, which is another blow to the world economy and that will lead to even higher inflation, since the supply chain problems will worsen.
And we have a war in Europe, Russia is not backing down and looks like is preparing to attack Odessa, and there was a talk from a Russian General about plans to invade part of Moldova.
It is going to be a big week for the US stock markets, the big four Apple, Amazon, Microsoft, and Alphabet (Google), are reporting earnings. If the price of their stocks breaks below the key levels, we will see an acceleration of the selling in Nasdaq, S&P 500, and the Dow Jones.