Stocks markets were able to rally higher this week, but questions remain over whether that can last since the Fed is now taking a more aggressive stance. The Fed is planning on hiking rates to combat a surge in inflation. The RBA met this week and failed to alter its rate path projections. However, on Wednesday Governor Lowe did mention that ‘interest rates could rise this year’ which should see the AUD rally. The Bank of England hiked as expected and the Russian/Ukraine crisis bubbled away in the background. Investors should be aware that any incursion by Russia into Ukraine will send natural gas prices higher.

Other key events from the past week

  • US stocks: Sell the rally? Feb 04: US stocks all put in near term bottoms this week. However, with US growth expectations expected to slow most analysts still see strong reasons to sell the rallies. Will sellers step in again next week?
  • AUD: AUS interest rate statement, Feb 01: The RBA took a surprise dovish tilt this week, but the AUD rallied higher anyway. The RBA face a credibility issue as most analysts think the RBA has just denied the inevitable rate hike that will need to come. For now, wages and inflation are key focus points for the RBA.
  • GBP: UK interest rate statement, Feb 03: The BoE showed they were getting serious on inflation and hiked by 25bps. Ramsden, Saunders, Haskell, & Mann all voted for a bigger hike of 50bps and this lifted the GBP this week. Remember that UK PM Johnson still faces a potential leadership challenge.

Key events for the coming week