Wall Street Falls. Gold goes up, gold goes down sharply

Friday’s session on the New York Stock Exchange ended with a sharp decline in the major indices. Investors are concerned about Federal Reserve policy and speculation about the Russian invasion of Ukraine. Gold became more expensive and the Polish zloty fell significantly against the euro and the dollar.

It all started Thursday after the release of CPI inflation data, which It accelerated faster than expected and with a score of 7.5% reached a maximum of 40 years. It has long been known that inflation in the US (and not only there) is unacceptably high and that the Federal Reserve should have reacted to it long ago by normalizing monetary policy. But as of Thursday, the market did not panic. And on Thursday it started.

This is the only way to explain the bidding of the prophecy as to how difficult it will be for Powell & Co. to start raising interest rates. There are already 5-7 increases by the end of the year. There is speculation about a rate hike in March of up to 50-75 basis points. Some are even talking about the possibility of raising the federal funds rate before the FOMC meeting scheduled for March 16.

But investors now fear that the Fed has lost control of the inflationary narrative and must do something unusual to restore it. So, it is sure to raise interest rates and even risk a recession before the next presidential election. The Fed rate (current: zero) has never deviated much from current CPI inflation.

Inflation appears to be a major factor in the assessments. Terry Sandvin, chief equity strategist at US Bank Wealth Management, told Reuters that rising inflation is putting pressure on multiples (ie lower c/z ratios – editor’s note) and that’s what we’re seeing right now.

On Friday, geopolitical issues added to the Fed’s inflation concerns. Important US government officials suggested it to the media The Russian attack on Ukraine could take a few dozen hours. So far, these are only the words of the Joe Biden administration. But the mere fact that it’s raining at all makes things dangerous.

After something like this, it’s no surprise that the market’s reaction has been so sharp. The S&P 500 fell 1.90% to 4,418.61 points. The Nasdaq fell 2.78% to end the week at 13,791.15 points. The Dow Jones gave 1.43% to 34738.06 points.

Other financial markets also reacted to the news from the White House. The dollar strengthened against the euro – the price of EUR / USD closed at 1.1340. Seeing armed conflict outside our eastern borders succeeded in bringing down the zloty. Euro exchange rate
It rose more than 6 times, reaching the level of PLN 4.5653. The dollar rose by 0.09 PLN Friday’s prices ended at PLN 4.0247.

Capital flows into so-called safe havens. Gold in dollars rose 2% to $1,863.05 an ounce. Strong – As much as 10 basis points. – US Treasury yields fell to 2% on Thursday for the first time since February 2020. The Swiss franc also rose, resulting in nearly a whopping 10 pounds in the Polish market Through a jump in the exchange rate of the Swiss franc / Polish zloty.

Krzysztof Colani

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