Increased market volatility expected ahead of the FOMC minutes
Brent oil prices are trading almost flat during the early part of Wednesday’s session, as the prospect of additional Western sanctions on Russian exports, which normally would be expected to trigger a sharp rise in oil prices, were counterbalanced by news of an extension of Shanghai’s lockdown and surprisingly high US crude inventories. The new sanctions proposed by Western allies, which include a proposed ban of coal imports, will leave Russian oil and gas exports untouched. As an EU ban on Russian oil imports remains possible – but is far from guaranteed – and demand side pressure eases due to the ongoing covid shutdown in China, the price of the barrel is likely to remain around the current levels in the near term, despite the stiffer stance from the West in relation to Moscow’s invasion of Ukraine.
Ricardo Evangelista – Senior Analyst, ActivTrades
European shares followed the global “risk-off” trend on Wednesday with all benchmarks drifting lower from Frankfurt to Lisbon, as monetary policies and growth expectations keep on pressuring market sentiment. Today will be a key day for both stock and currency traders with the release of the minutes of the last FOMC meeting. While investors remain focused towards refinancing rates and a possible half a point hike at the April meeting, the most crucial question for traders is related to the Fed’s balance sheet reduction, especially following the latest hawkish words from Fed Governor, Lael Brainard. Such a “Quantitative tightening” would be a strong and significantly hawkish move from the Fed, as a message sent to the broader market indicating the “party may be over”. However, questions remain regarding the long-term effect of such moves and it’s hard for investors to assess the real impact of higher rates and withdrawn liquidity to growth. Ahead of the start of the earnings season next week, the short to mid-term outlook remains cloudy for investors. The latest developments related to the war in Ukraine and renewed virus-related shutdowns are pressuring market sentiment and the appetite for risk. That said, even if the “risk-off” stance is likely to prevail today, more volatility will be expected, especially towards energy shares as the US Crude Oil Inventories loom later in the afternoon.
Pierre Veyret– Technical analyst, ActivTrades
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