March Rate Hike, Oil and China Strikes

14 ene 2022

After the highest consumer inflation in the last 40 years, followed by a 10% increase in producer prices, the ranks of the Fed finally closed: it is necessary to tighten monetary policy as soon as possible. And if at the start of the week the markets were counting on an increase in May, then after a series of aggressive comments from the Fed officials after inflation, now with a probability of 90%, a rate increase is expected in March. In fact, March is just around the corner. So before the denouement, there was nothing left.

A little longer until the resolution of the pandemic issue. China, with its zero tolerance for the pandemic, is starting to harm the global economy, slowing down global logistics, which cannot recover without it. Well, Biden, meanwhile, is going to use the army to ensure the functioning of hospitals.

Formally, the current fundamental background is quite favorable for the US dollar, but it has been sold all week. The fall looks manageable so far, and we see it as more of an excuse to buy cheaper than to flip short. The best candidate for mid-term purchases of the dollar among the majors is the euro. Well, the Turkish lira remains an attractive target for sales against the US dollar.

Where the negative fundamental factors have not yet been sufficiently taken into account, it is in the oil market. Everyone somehow forgot about the next increase in production from OPEC +, about the growth of production in the US, about interventions from the States in the form of sales of the strategic reserve (the US Department of Energy said on Thursday that it sold 18 million barrels of strategic reserves of crude oil to six companies) , about thousands of canceled flights around the world due to the outbreak of omicron, the closure of cities in China, etc. In general, selling oil at current prices is a great trading idea.