Federal Reserve (Fed) Governor Lael Brainard’s hawkish comments rocked the markets yesterday as she said that the next interest rate hikes should be more aggressive to tame the skyrocketing inflation in the US, and that the Fed could start reducing its near $9 trillion balance sheet as soon as next month, and at ‘a rapid pace’. Investors will be closely watching the Fed minutes today. There would be no surprise if the Fed hinted a 50-bp hike in the next meeting. Activity in Fed funds futures assess more than 75% chance to a 50-bp hike. Yet, what will really make the difference is the speed at which the Fed will shrink the balance sheet. And there is a big potential for a hawkish pricing on this front. In the FX, Brainard’s comments sent the US dollar rallying yesterday. The dollar index is now preparing to flirt with the 100 offers, the EURUSD sank below the 1.09 level as Cable pulled below the 1.31 mark, but if the Fed minutes doesn’t reveal a further hawkish surprise, we shall see the dollar give back the latest gains and the euro and the pound record a minor rebound. Else, the US and the Europeans are expected to announce a new round of sanctions today. EU is expected to announce a ban on Russian coal imports, but not on Russian oil and gas. The reduced risk of a European ban on Russian oil keeps the oil bulls contained. Bitcoin tipped a toe below the $45K mark on hawkish Fed comments, while gold remains undecided near $1920, supported by safe haven demand, and pressured by rising US yields.

Watch the full episode to find out more!

• 0:00 Intro
• 0:24 Brainard’s hawkish comments sent stocks lower
• 1:50 Deutsche warns of recession
• 2:24 FOMC minutes: what to expect?
• 5:58 EU to ban Russian coal, but not Russian oil and gas
• 6:46 Oil bulls contained on unlikely sanctions on Russian oil
• 8:00 Energy stocks upbeat
• 8:52 Bitcoin under pressure
• 9:10 Gold, torn between safe haven demand & rising yields

Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.