The hysteria in the Western media regarding the geopolitical tensions happening in Ukraine has reached its peak. All leading business media such as Bloomberg, Reuters, and CNBC are also actively involved in these events.
The beginning of the geopolitical conflict has been actively promoted on the websites of these agencies, which is supposedly the reason for the decline of global stock indices. However, the market is clearly not paying attention to this, fully concentrating on the expected increase in the Fed's interest rates at the March meeting. Watching everything that happens, we can say that the geopolitical problem is a kind of screen behind which the Fed stands, and, as it is believed, a sharp increase in the cost of borrowing on March 16 following the meeting immediately by 0.50% from the current zero.
On Monday, investors were anxiously waiting for the Fed's emergency meeting, which is still unclear whether there was or not, since there is no actual information about this matter.
Meanwhile, Asian stock indices slightly recovered today amid the hysteria in the Western media – on the one hand, this is due to the lack of implementation of some media forecasts about the geopolitical attack, and, on the other hand, the market seems to be ready to accept the Fed rate hike immediately by 0.50% next month. Given this, futures for US stock indices are traded in different directions, while futures for European stock indices are still in the "red" zone.
Investors are likely beginning to adapt to the new reality of a 0.50% rate hike in the United States, which could cause a change in the negative market mood to positive unless there is some kind of provocation from Ukraine.
As for the currency market, the US dollar received support on Monday, but in general, it remains in the range of 95.50-96.50 points. US government bond yields are consolidating. The yield of 2-year notes stopped below the 1.6% level and the benchmark of 10-year Treasuries is just below the 2.0% level. Some investors are likely waiting for the possible outbreak of a conflict in Ukraine, which is caused by the lack of clear dynamics of these financial assets.
We believe that nothing will happen in the east of Ukraine in the coming days. Investors can calm down and it will be possible to observe a recovery in demand for company shares and a weakening of crude oil prices, which have soared recently amid the West promoting the topic of geopolitical conflict.
Forecast of the day:
The EUR/USD pair found support at the level of 1.1300. If the mood of the market changes in a positive direction amid the publication of eurozone GDP data for the 4th quarter, the pair may recover to the level of 1.1380.