Expectations of higher rates

22 February, 2018

On Thursday global stock markets continue to decline after a sharp sell-off in US stock exchanges on Wednesday. The risks are more likely to be exerted on markets caused by the expectation of relatively higher interest rates.

The European Stoxx Europe 600 is down by more than one percent in the middle of European trading, the index of the main European market - German DAX is down 0.70%. Futures for US indices are also insignificantly in the red zone.

The decline in markets and equity assets sale-off intensified after the publication of reports on the meeting of the American regulator in January. The reports strengthen expectations of rate-hikes in 2018. Forecasts of central bank officials in December 2017 predicted at least three expectations of a rate hike this year.

The IFO business sentiment index in Germany fell slightly, putting pressure on German 10 year bonds, which fell to about 0.715%, from 0.734%, when the markets opened in Europe.

The DX dollar index continues to grow this week, the index was in neutral position at the beginning of trading on Thursday. The dollar fell 0.5% against the yen to 107.24 cents, while the euro remained at 1.228 dollars.

Yesterday's statistics from the US turned out to be mixed. PMI rose, but sales in the secondary housing market were below the forecast. As a result, the dollar index jumped higher, exerting even more pressure on EUR / USD. Investors considered that the issue of raising the interest rate at the meeting in March was almost settled and rushed to work out this event.

Today, there is no big and important macroeconomic data in the US, but some representatives of the FOMC will deliver a speech that could further strengthen the market's expectations of an early rate hike in the US.

On Eur/USD daily chart, there is no fundamental changes so far. The price is still moving in the wide horizontal range with the boundaries at 1.2185-1.2500. Now the price moves from the top to the bottom and so far there are no signs that anything will prevent the price from the achievement of this goal.

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