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The E-mini S&P 500, which is down by about 0.5%, is bracing for the interest rate hike from the US central bank Fed as investors see recession hints from the monetary policy to fight inflation.

The Federal Reserve might slow down the pace of interest rate hikes by the recent economic data which showed some signs of shrinking as a 25 bps hike is expected on Wednesday, leading the equities sector to be bullish while a higher increase might let stocks be pressured.

However, January is up by about 3.9% by signs of easing inflation and robust economic jobs data as the PCE slowed and spending declined. Meanwhile, the Nasdaq dropped by about 0.6% and the Dow Jones fell by about 0.4% in today’s trading session.

The volatility index is positive with additional bearish signs, leading the market to a potential balanced behavior with buyers into the New York trading session as investors await fresh data on Home prices, Employment costs, Chicago PMI, and Consumer Confidence to gain further clues about the economic path.

The dollar index rose about 0.2% with slight bearish signs around the highs which could support the commodities sector in case of a drop in the intraday interval which should be supportive for the US indexes as well.

The daily interval of the ES futures contract trades around the Quarter’s upper value extreme while the market dropped 1.2% in yesterday’s session, leading the market into the developing value and may target the Quarterly VWAP.

The intraday interval seemingly is imbalanced to the downside and traders may wait for a bottom to reverse price higher in the New York trading session. Therefore, market participants may await a move back into the developing value as the first sign of buying initiation via the VWAP perspective.

The institutional sector combined with funds decreases their net positions on both sides with long liquidations and short covering, ahead of the crucial hike meeting, reducing risks, or taking profits on satellite positions. 

The Bank of England and the European Central Bank will decide on monetary policy this week as well. A hawkish operation might initiate buyers into the pound and euro to increase their value and combat inflation with ongoing tightening.

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