Following mostly negative tone in the Asian markets, European equities hold in the green zone on Monday as oil prices keep retreating from recent tops, somehow easing worries about global inflation. However, the upside potential looks limited as geopolitical concerns over Ukraine continue to persist. Furthermore, China battles its biggest COVID outbreak since the onset of the pandemic, adding to fears of a disruption to global supplies. Still, US stock index futures bounced along with European equities amid hopes of Russia-Ukraine peace talks.
As risk sentiment has improved, the dollar struggles to attract safe-haven demand that pushed the currency to fresh nearly two-year highs a week ago. The USD index has settled just below the 99.00 figure on Monday, with the 98.70 zone capping intraday losses so far. Earlier, the index was rejected from local peaks around 99.30.
Market participants are now shifting their focus to the Federal Reserve’s two-day meeting that concludes on Wednesday. The Fed is widely expected to hike interest rates (for the first time since 2018) by a quarter percentage point to curb inflation pressures in the country’s economy. As a reminder, the report last Friday showed that the US CPI rose to a fresh 40-year high in February, thus further pressuring the central bank to start raising rates despite the ongoing geopolitical mess.
Despite the rate hike is fully prices in by the market already, the greenback could see a bullish reaction to the outcome of the Fed’s meeting if the central bank delivers a hawkish message on the outlook for further tightening in the coming months. As such, the USD index may regain the 99.00 figure and even challenge long-term highs registered in the 99.40 zone earlier this month.
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