Markets reacted to statements by the Fed head and the US Treasury Secretary - 24.3.2021

Today, the US dollar index continues to grow steadily. It has already updated its 4-month high. Investors reacted positively to US Treasury Secretary Janet Yellen's statement about a possible tax hike for finance infrastructure projects. In addition, Fed Chair Jerome Powell expressed the opinion that the current inflation surge in the USA (+1.7% yoy in February 2021) is temporary. It also supported the dollar. The greenback was in high demand as a safe haven against the increased risks of a new wave of the coronavirus pandemic in Europe, after the suspension of the use of the AstraZeneca vaccine. British inflation data for February (+0.4% yoy) came out this morning: they turned out to be unexpectedly positive and surpassed forecasts (+0.8%). However, this did not affect the British pound rate, which continued to decline.

US stocks dropped yesterday for the same reasons the US dollar strengthened. A possible tax hike, which was mentioned by US Treasury Secretary Janet Yellen, could reduce the budget deficit by increasing the burden on corporations. The statement by Fed Chair Jerome Powell that the current surge in inflation will be temporary (one-time) was taken by investors as a signal that the Fed rate could be raised before 2024. This can increase the debt (credit) burden on corporations. Yesterday's US economic data was negative. New home sales in February fell by 18.2%, which is more than expected (-6.5%). The data on durable orders in February and the Markit Manufacturing PMI for March will be released today in the US. The forecast is neutral. Also, the Fed representatives and its Cahir Jerome Powell are expected to speak.

World oil prices slumped markedly on Tuesday for the 3rd day in a row. The EU and a number of other countries suspended the use of Western Covid-19 vaccines due to the side effects. In Germany, the quarantine has been extended until April 18. This is a negative factor, as the consumption of motor fuel may decrease. Brent approached the psychological level of $60 per barrel. According to the API, US oil reserves grew by 2.9 million barrels over the week. Investors are awaiting official stock data from the US Energy Information Administration. Recall that the next OPEC+ meeting will take place on April 1, the volumes of oil production in May will be discussed. World oil prices are rising this morning on news that a giant container ship ran aground in the Suez Canal and blocked the movement of all ships, including oil tankers.