Signs of fear of interest rate increases

Falls in the stock markets, drops in commodity prices, incl oil, discount cryptocurrency - these are the signs of a wave of fear that seems to be flooding the financial markets with the announcement of interest rate hikes in the US.

Higher interest rates can make it more expensive to raise the dollar, and thus increase the cost of financing your investment. This can explain a situation that we have not seen for a long time: on the same day, virtually every asset class except the US dollar seems to decline in value.

Already last week, which was most clearly visible on Friday, the situation in the financial markets seemed tense. US stock indices seemed to fall by nearly 3 percent. Today we can observe a potential continuation of declines on the stock exchanges. Contracts in the US seemed to drop by about 1 percent on Monday morning. In Europe, the scale of the decline seemed even greater: German DAX decreased by almost 2 percent, and Euro Stoxx 50 by over 2,5 percent

Cheapest crude oil in two weeks

The situation on the commodity market is similar, where the price of a barrel of WTI oil has already fallen by almost 5%, to around USD 97, which is the lowest level in almost two weeks. Here, however, prices may also be affected by concerns about the pandemic situation in China - i.e. protracted restrictions. Agency Bloomberg Chinese gasoline, diesel and aviation fuel demand will fall by 20 percent in April, it said. year on year, which corresponds to a drop in oil consumption by about 1,2 million barrels per day.

Added to this are concerns that sharp increases in US interest rates will negatively affect global economic growth and fuel demand. Worries about demand seem to prevail over uncertainty about supply also due to the specter of a global economic slowdown or stagflation.

The dollar is gaining, other currencies and cryptocurrencies are losing

Expectations regarding a series of interest rate hikes in the US are supported by the dollar. The exchange rate of the main currency pair EUR / USD is approaching 1,07, which is the last level we dealt with in March 2020. The entire US dollar index may remain above the level of 100 points.

Popular cryptocurrencies also failed to protect themselves against a worsening of market sentiment. Bitcoin price today drops to approx. 38 thousand. USD, a Ethereum up to 2,8 thous. USD.