Global equities were volatile in overnight trading after the Federal Reserve signaled more vigorous monetary tightening in order to control high inflation. As the US economy recovers from its COVID-19 downturn, inflation reached 7.9 percent in February on an annual basis, the highest yearly increase in 40 years.  

US and Asian indices rose on the back of better sentiment towards banking stocks like JP Morgan and Bank of America. Broadly speaking, the interest rate income outlook has improved for banks and other stocks in the financial sector.  

For the time being, fears over geopolitical risks calmed as investors focused on stock giants like sports apparel Nike, which reported strong quarterly demand and better-than-expected revenues and earnings. 

In other news, volatility in spot gold and oil prices subsided relative to earlier in the week. Market sentiment is wary and sensitive towards geopolitical risks as the conflict in Ukraine reaches the one-month mark. Spot oil prices may react sharply to further market shocks stemming from supply fears in the near term.  

All eyes on the Fed 

After recent hawkish rhetoric, the Federal Reserve may hike its key rate guidance by .50 basis points at its next meeting in May as it battles the effects of inflation, one of which is an erosion of bonds' value. During periods of quantitative easing (QE), the Federal Reserve buys assets to support the economy and at the time of writing holds an estimated 5.7 trillion USD in Treasury securities. A hike in interest rates could reduce inflationary effects while shoring up attraction towards bonds because of the higher yields. 

Upcoming financial events 

Financial events to watch today are consumer spending and inflation figures in the UK which – depending on the results - may have a knock-on effect on GBP pairs. A speech by Federal Reserve Chair Jerome Powell could move the USD, gold, financials and bond instruments. Finally, the Bank of Japan releases its meeting minutes and policy outlook with a possible impact on JPY currency pairs.