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Author: Mr. Amar – Technical Analyst

As we enter the second quarter, it looks like the list of economic concerns is growing rather than shrinking, yet equity markets are in a very comfortable position. The rebound from the post-invasion lows has been impressive, to say the least, but the sustainability will become clear in the coming weeks. Soaring inflation, high commodity prices, aggressive monetary tightening, and inverted yield curves are just a few of the things worrying investors right now. The job of a monetary policymaker is never easy. Especially in the transparent world we live in now, where every speech and decision is questioned and criticized afterward. The task of containing inflation and staving off a recession lies ahead, and inverted yield curves suggest that they could take the economy to the brink.

As for the US market, another non-farm payroll report showed that the job market remains strong. Many traders will continue to focus on market expectations of how aggressively the Fed will be in the next round of rate hikes. Everyone on Wall Street will be paying close attention to the Brainard Fed’s comments on Tuesday. A number of economic releases will focus on how the business is faring given the early impact of the war in Ukraine. On Monday, the February factory orders release was expected to show a sharp decline, while the final reading for durable goods confirmed the moderation in orders. Tuesday includes business data that could fall and the ISM Services Index which is expected to improve. Wednesday is all about the FOMC minutes, which may contain more hawkish clues that could confirm a half-point rise for some traders. On Thursday there are jobless claims in the morning and consumer credit in the afternoon. Friday ends the week with wholesale inventory data.

The BoE softened its tone somewhat after the last meeting and yet markets are heavily pricing in a 25-basis point hike in each of the next five meetings, taking the policy rate to 2% by the end of the year. Bailey could use the platform to retire, but likely with little success given current inflationary pressures and more to come from commodity prices and the higher energy price ceiling starting this month. We’ll also be hearing from a selection of other MPC members next week, while latest services and construction PMIs are the headline data.