FX.co ★ The euro has reached price parity with the dollar! The US stock market is falling again

The key US stock market indices – Dow Jones, NASDAQ, and S&P 500 – finished Monday with a slight decline. Such insignificant changes as we've witnessed recently play almost no role. All three stock indices and the majority of individual stocks continue to trade near their local lows, which means that investors and traders have no desire to purchase them or risky currencies. That evening, the value of the European currency plummeted to $ 1.005. Although similar occurrences have occurred within the last two decades, this event can be considered historic. Even though there were no significant macroeconomic or fundamental events at the start of the week, the most surprising aspect is that the euro began falling on Monday night and continues to do so. Therefore, we can refer to this uncontrolled fall as a "collapse." The euro currency can now fall to any dollar exchange rate.

The same roughly holds for the US stock market. There is no sense of a collapse, but the underlying fundamental environment is identical to risky currencies and other assets. Remember that the key factors in the decline of all risky assets are now complex geopolitics and the Federal Reserve's aggressive monetary policy. The probability of a 0.75% rate hike in July increases daily. In addition, the likelihood that the Fed will not stop at 3-3.5% is growing. This is supported by the fact that the rate has risen to 1.75%, and inflation continues to rise despite the efforts of the American regulator. Tomorrow, a new inflation report will be released in the United States, which again does not bode well for the American economy, as forecasts call for another rise in the indicator, this time to 8.8% y/y. With such an inflation rate, the Fed has no choice but to accelerate and intensify monetary policy tightening. Therefore, we believe the rate will increase by 0.75% in July and most likely in September. What will occur next cannot be predicted. At the very least, everything will depend on when inflation begins to decline. And only after this occurs will it be possible to discuss moderation in the rate of monetary policy tightening. Risky assets and currencies will remain in the risk zone so long as the Fed maintains a "cruising" rate of interest rate hikes. Regarding geopolitics, everything is transparent here. As relations between the West and the Russian Federation continue to deteriorate, traders and investors prefer to deal in dollars and safe investments.