Daily Wrap Up 27 April 2022

27 Apr 2022 04:39 PM

Stocks remain volatile as Russia takes aim at Poland and Bulgaria  

Equity markets in Europe and the US are experiencing moderate volatility as Russia announced it will cease gas exports to Bulgaria and Poland. Moscow is targeting the countries as a way of flexing its muscles. Traders sat up and took notice because it could be the beginning of a new chapter in the war. Stock markets in the eurozone are holding up relatively well for now, but there are some concerns that larger countries could be next on Russia’s hit list.

We are one week away from the Federal Reserve’s next meeting, and it will be closely watched. There is a lot of talk the bank will hike rates by 0.5%. Dealers will be gauging the commentary at the update, as they will be wondering how many more rate hikes could be announced this year. US tech stocks have seen violent swings recently as they are very sensitive to the possibility of higher interest rates.

The dominance of the US dollar continues as the greenback has registered yet another two-year high. Last week, Fed chair Jerome Powell, issued a hawkish statement in which he indicated that rates could be lifted by 50 basis points at next week’s meeting. The currency pair has also come under pressure on account of the heightened tensions surrounding Russia. Moscow has halted gas exports to Poland and Bulgaria, and that has sent out shockwaves across Continental Europe as traders are wondering could other countries be next? The is all feeding into the fall in EUR/USD, which traded at a five-year low today.

Once again, the strength of the US dollar is hanging over the bullion market. Gold typically rallies when there is uncertainty in stock markets – which we have seen a lot of recently. The yellow metal is traded in dollars so the bullish move in the greenback is acting as a cap to any possible gains. Gold traded at a level last seen two months ago. It says a lot about the weakness in gold when it is at a multi-month low when stocks have been trending lower for almost one week. Silver is also being dragged down by the strength in the greenback. The metal is also weaker due to lingering concerns about the health of the global economy, especially in light of the lockdown in Shanghai.

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