Geopolitics, Monetary Tightening Pressure Equities, EUR

April 07, 2022 09:28

Geopolitical events and monetary policy tightening pressured global equities and the EUR overnight after the FOMC’s March meeting minutes confirmed the central bank’s hawkish stance.  

“Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified.” US Federal Reserve March Minutes. 

The Federal Reserve’s next meeting is at the beginning of May when the central bank is widely expected to increase its key interest rate by 0.5 percent, taking overall guidance from the current level of 0.5 percent to 1 percent. US inflation rate expectations have risen on the Russia-Ukraine conflict amid upward pressure on commodity prices.  

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EURUSD currency pair

The USD rose against the EUR as investors priced in the strengthening US economy. At the same time, the EUR was weaker ahead of elections in France this month. Elections are a source of uncertainty and can affect investor sentiment. The political changeover comes at a time of conflict in Ukraine, amplifying the uncertainty factor towards the EUR and supporting short-term attraction for the safe-haven USD. 

USD strength is keeping spot gold prices on a leash at the time of writing, but safe-haven asset prices remain sensitive to geopolitical developments in Europe, meaning that unexpected volatility may be just around the corner. 

The US Energy Information Administration (EIA) reported a 2.4-million-barrel increase in crude oil inventories for the week ending April 1, 2022. The news calmed supply-side fears to a degree and crude oil spot prices retreated.  

Trading news today 

The big trading news event to watch today is the Eurozone’s year-on-year retail sales release for February which may have an impact on the EURUSD currency pair depending on the results and investor reaction to the numbers.  

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks. 

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.