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The ruble was afraid of sanctions and the dollar froze in anticipation



This night, the American currency in a pair with the euro lost about 0.4%, reaching the level of 1.1909, around which it is quietly trading on Tuesday morning. The dollar index dropped 0.5% yesterday and has so far remained around 91.935 in anticipation of further drivers. They won’t be long in coming: Powell is speaking to Congress today. It is expected to confirm the steady improvement in the US labor market. In the medium term, Nonfarm Payrolls and Unemployment are indicators that investors will be looking at. These data can greatly affect the position of the Federal Reserve System, and with it, the entire global stock market. By the way, last week the Federal Reserve System just caused a drop in global indices, signaling that it will raise interest rates at a faster pace than previously expected. Also, representatives of the regulator are going to consider the possibility of abolishing monetary incentives in the near future. Overall, they moved their forecasts for the first potential hike from 2024 to 2023, and some of them did not rule out this as early as 2022. The Fed’s turn towards the beginning of policy normalization is fueled by the rapid rise in inflation: a dynamic that has kept financial markets under pressure for the past few years. The St. Louis and Dallas Fed Chairs also softened their rhetoric yesterday. As a result, this morning world indices continued their recovery from the levels of four-week lows. Investors focused on the post-pandemic growth prospects and stopped worrying about the US regulator’s hawkish stance. For example, futures on EuroSTOXX 50 gained 0.4%, while the FTSE contract rose 0.3% over the morning. The broad index of shares of the Asia-Pacific region without Japan MSCI added 0.4%, thereby recording an increase of 4% since the beginning of the year. In Japan itself, optimism is also growing: the Nikkei rose 3.1% on Tuesday. Stocks in South Korea rose 0.7%, Australia rallied 1.6% and China rallied 0.8%. As for the Russian currency, it started the new week on a negative wave. This is due to new sanctions threats from the United States: the dollar-ruble rate rose above 73.30 for the first time since June 3. In addition, borders are now opening: while everyone was at home, this largely supported the ruble exchange rate. However, now that the holiday season has begun and air traffic is being restored, the local currency is being actively exchanged for dollars and euros. This process will last at least until autumn – of course, if there are no sharp quarantine restrictions. However, such a scenario is extremely unlikely, as it will shock not only the ruble exchange rate, but also the economy as a whole ._____________ Alexander Kuptsikevich, Lead Analyst, FxPro

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