FX.co ★ Market outlook is not very optimistic right now. Dollar is likely to rise ahead of Fed's monetary policy meeting

There was a slight increase in the EU stock market, following the strongest sell-off last week and on Monday, which was caused by the statement of Fed Chairman Jerome Powell that hinted at potential more aggressive interest rate hikes by the Fed. He said rates may increase by 0.50% to 1.00% in May, thereby returning demand for dollar.

Now, it appears that the market has already taken into account the likely rise in Fed rates, so if there is no surprise, then a rebound may begin. But if rates are lifted by a larger percentage, for example, 0.75% to 1.25%, markets will continue to see strong sell-offs.

A small increase in markets will return risk appetite, which will significantly weaken dollar's position. In this case, not only stock indices and commodity prices will go up, but the dollar exchange rate, which has been strengthening in recent days, will shift down.

What can be expected this week?

So far, there is no reason to expect a major shift in markets, but the observed rebound in stocks could be taken as a good opportunity to short sell, primarily in the shares of companies that have grown significantly during the COVID-19 pandemic.

In terms of dollar, a price increase may continue depending on how the Fed increases its interest rates at its next meetings.

All in all, the outlook of the global market is not very optimistic yet.