Fear of the Fed could be a driving force for markets again Wednesday.
The fallout from diverging central bank policies sparked a dollar rally and stock market selloff Tuesday, as traders reacted to the European Central Bank's bond-buying program and the fact the Fed could signal it is getting even closer to a rate hike when it meets next week.
As the dollar rose, the euro slumped to $1.07 against the greenback, edging close to parity much sooner than some strategists had expected. The S&P 500 was whipsawed, losing 1.7 percent to 2,044, in its worst selloff since Jan. 5.
Gold futures hit a three-month low of $1,155 an ounce, and copper futures were off 1.8 percent. West Texas Intermediate crude futures slumped 2.6 percent to $48.71 per barrel.
George Goncalves, head of rate strategy at Nomura, said the dollar is doing well because investors are expecting the Fed to act. The market is divided between whether the first hike is in June or September.
"It's just very normal for the market to be volatile at a time when you're making this transition to a different interest rate regime," said UBS equity strategist Julian Emanuel. Emanuel said the S&P could fall toward 2,000.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.