It’s been quite a week of volatility as investors reacted to events unfolding in Ukraine and the West’s response in terms of sanctions against Russia. Stocks fell on Monday, rallied on Tuesday, plunged again on Wednesday, then rose sharply on Thursday, before extending those gains on Friday. The final result ? A roller coaster ride to nowhere: As of this writing on Friday afternoon, all major US indices were trading around the flat line. Crude Oil also performed similarly after breaking through $100 before falling back below that hurdle later in the week. Safe gold moved closer to $2,000, before slipping at the end of the week as investors bought stocks.
Ukraine: glimmer of hope, but perilous situation
As we move into the new week, the situation in Ukraine and the war of words between Russia and the West will continue to dictate near-term sentiment, mitigating the impact of upcoming economic data releases (see below) . Judging by the strong rally in risk assets over the weekend, investor sentiment seems much calmer about the situation. There is hope for some sort of peace after the Kremlin says Putin has agreed to hold negotiations with Ukraine’s Zelensky. But the situation remains perilous and there are no guarantees.
Far From Geopolitics: The Fed’s Policy Response to Inflation
Meanwhile, investors’ attention may slowly shift away from geopolitics as March approaches, which will be another big month in markets as the Fed finally raises interest rates, potentially triggering a tightening cycle. major this year as it attempts to combat soaring inflationary pressures. St Louis Fed President James Bullard again reiterated his support for a 100 basis point hike by the end of June, adding that there is a limited connection between events unfolding in Ukraine. and the US economy, where inflation is getting very high. The latest data continues to point to higher prices. The Fed’s favorite measure of inflation beat expectations on Friday as the PCE core price index hit its highest level since 1982, long before I was born. It climbed to 5.2% year-on-year in January, from 4.9% in December.
Data highlights for the week ahead
In the week ahead, we’ll get a final look at the US Nonfarm Payrolls and Payrolls report, while the latest CPI measure of inflation will be released the following week ahead of the FOMC meeting. March 16. These numbers could be a deciding factor. between a rate hike of 25 or 50 basis points. Here’s what’s on the agenda for the coming week:
After what has been a very volatile month, window dressing by fund managers on the first day of the week and continued Ukraine-related volatility could lead to strong market moves.
Due to prolonged shutdowns in Australia and somewhat subdued wage growth of 2.3% in the last quarter, the RBA is expected to keep policy unchanged at 0.1% at this meeting. The focus will be on the language used to prepare the market for a move higher towards August. If this points to an earlier rate hike, then the Aussie could rebound.
Unlike the RBA, the BOC is expected to rise 25 basis points, especially in light of soaring oil prices and improving Canadian economic data of late.
Eurozone CPI is expected to hit a new record high of 5.3%, which will surely put pressure on the ECB to tighten policy sooner. Will the euro finally rally?
We’ll get a final look at the report on the lack of US farm jobs and wages ahead of the FOMC meeting on March 16. If the data is healthy, it won’t move the market much, as a 25 basis point upside is fully priced in.