Stock markets are bouncing back on Tuesday following a rocky couple of weeks as investors grew nervous about the economic impact of tightening.
Fed Chair Jerome Powell could not have been more clear on Friday on the central bank’s tightening stance and unlike the warnings from his colleagues, the message appeared to have finally gotten through.
Which makes today’s move all the more curious. It’s not the fact that we’re seeing a rebound as equity markets don’t move in straight lines, rather it’s the strength of it that is interesting.
Prior to Friday’s speech, investors appeared determined to cast aside warnings in favour of the dovish pivot narrative and today’s moves may suggest the same could still be true after a brief pullback.
With a 75 basis point rate hike now viewed as the more likely outcome from the Fed in a few weeks and ECB officials putting a similar move on the table ahead of its meeting next week, how strong of a recovery can we really expect in equity markets?
Central banks have made it perfectly clear now that the fight against inflation is their primary concern and a hard landing may just be the price to pay. While that may change if we see any significant improvement on the inflation front over the coming months, the risks still appear more tilted to the downside for the economy.
A big moment for bitcoin
Bitcoin is enjoying a slight recovery today after surviving a brief dip below $20,000 over the weekend. The hawkish sentiment by Powell took its toll at the end of the week but crypto bulls are fighting back to defend what could be a key level. We may need to see more of the resilience displayed in recent months as a failure to do so could quickly see bitcoin retesting the June lows.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
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