Thought you wouldn't hear from Fed boss Jerome Powell this week? Nope, he gave another speech on Monday, and spared no effort to make financial markets understand that the Fed would probably accelerate its rate hikes to calm inflation. All this communication was probably carefully orchestrated: flexibility first, firmness second. On the investor side, the ploy worked rather well, since it pushed stocks higher. There is no alternative to stocks (the famous "TINA" concept), it seems the market is saying.
There were other surprising elements this week. Like the strength of the PMI activity indicators for major economies, even though the surveys were conducted among purchasing managers of large companies from March 11, in the midst of the war in Ukraine. Apparently, the end of pandemic-related restrictions outweighed fears about the conflict.
In the foreign exchange market, the dollar continued to rise against the yen, reaching JPY 122.1 by the end of the week. The ruble saw a small improvement after Vladimir Putin asked Russian fossil fuel buyers to settle the bill in his country's currency. It currently takes 99 RUB for 1 USD. The EUR/USD pair has been fluctuating gently around the 1.10 pivot.
The Fed's hawkish stance helped push the yield on 10-year debt in the US back up to 2.46%. In Germany, the Bund rose to 0.56% while in France, the OAT flirted again with 1%.
On the crypto-currency side, we're seeing renewed energy this week, with bitcoin recovering almost 10% and returning to a position around $45,000 at the time of writing. But the crypto-currency still seems tied to the Nasdaq. Correlated for many weeks to the US technology index, but with much higher volatility, bitcoin is proving, even more so during this hot geopolitical environment, that it is not a safe haven.
Two important statistics are in sight next week in the US: February PCE inflation (Thursday) and March employment figures (Friday). In Europe, the focus will be on the preliminary March inflation numbers, particularly for Germany (Wednesday) and the Eurozone (Friday).
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