Investors await US and EU PMIs ahead of Fed's meeting

Following the stock market recovery over the past two days, investors' attention on Wednesday turned to the PMI data from Europe and US, the US non-farm payrolls report and the Federal Reserve meeting. In addition, the energy market may fluctuate upside due to the announcement of a new round of European sanctions against Russian oil.

The dollar is up considering tightening policies

Following the sideways in Asian trading, the euro is falling to 1.051 before the start of European markets. At the same time, as speculation increases about 50-point rate hikes at today's Fed meeting, the dollar index is strengthening.

EU PMIs

Traders expect the EU Markit Composite PMI and Services PMI to rise in April. But there are still concerns that the March retail sales will hit their first negative record in 2022 with a contraction of 0.1%.

Given the Federal Reserve's overtaking of the European Central Bank in contractionary policies, the euro currently has little excuse for showing strength against the dollar. For this reason, traders have turned their attention to support levels

US data

In addition, the ISM Non-Manufacturing PMI for April is released on Wednesday and is expected to improve from 58.3 to 58.5.

On the other hand, labour market data show improved employment in the United States, supporting the Fed's resolve to pursue interest rate hikes more aggressively.

Yesterday, the number of job openings in April exceeded 11.5 million. The market forecasts that non-farm employment, released by the ADP on Wednesday, will fall from 455,000 to 395,000 in April. Suppose the labour market continues in the same way. In that case, hourly wages can increase, signalling a good sign of growing demand.

Oil market

Since the beginning of trading on Wednesday, two important news has affected the oil market. More than expected drop in oil reserves in last night's API report, which showed a decline of 3.5 million barrels in the previous week, eased investors' concerns about the lack of sufficient demand in the market. The oil inventories are expected to decrease by 829 thousand barrels in the previous week in today's Energy Information Administration report.

In addition, the President of the European Commission is scheduled to announce new European sanctions against Russian oil today, which may provoke a reaction from buyers and cause prices to fluctuate.

Fed's meeting

The Federal Reserve meeting is scheduled for Wednesday, and investors expect the bank to raise interest rates by 50 points. This is something that is primarily included in the prices. But the more important question is about the speed with which the bank's balance sheet is declining, which could change the market's assessment of the severity of contractionary policies. So far, according to the latest meeting figures, the plan is to sell $ 95 billion a month in bonds, of which 60 billion are Treasury bonds, and 35 billion are mortgage-backed securities. Any change can give a new signal to the market. The program is scheduled to be launched on time in May.