US Treasury Secretary does not rule out rate hikes - 5.5.2021

The US dollar index is rising today for the second day in a row. Yesterday US Treasury Secretary Janet Yellen unexpectedly announced a possible Fed rate hike aimed to avoid "overheating" of the economy. Recall that US inflation in March reached 2.6% in annual terms, which is already well above the Fed's target of 2%. Nevertheless, the US regulator continues to issue money as part of its "quantitative easing" program in the amount of $120 billion per month and maintains the rate of 0.25%. Fed Chair Jerome Powell says his department will now monitor the recovery of the US labor market and unemployment, and inflation will lower by itself by the end of the year. This Friday, the Non-farm Payrolls for April will be published. Investors expect a significant increase in new job openings and a decrease in unemployment. A regular meeting of the Reserve Bank of Australia (RBA) took place yesterday, which had almost no effect on the Australian dollar rate. The RBA raised its forecast for Australian GDP in 2021 to 4.75% from 3.5% and lowered its unemployment forecast to 5% from 5.6%. This was offset by the negative effect of maintaining a low rate of 0.1% until 2024 and issuing the Australian dollar for asset buyback until 2022.

On Tuesday, Nasdaq and S&P 500 declined, while the Dow Jones rose. This was mainly due to the statement of US Treasury Secretary Janet Yellen about a possible increase in the Fed rate and weak macroeconomic data. The US trade deficit in March was the highest (-$74.4 billion). Industrial orders growth of 1.1% was less than expected (+1.3%). Today,  ADP will publish important data on the US labor market for April, so the forecast of the official Non-farm payrolls may be clarified. US stock futures are trading higher. Refinitiv predicts the S&P 500's total Q1 earnings are up 47.5%. This is noticeably better than the initial forecast of +24% at the beginning of the reporting season in April. By now, slightly less than 70% of companies have reported. Reportings from PayPal, Uber Tech, Booking, General Motors and others will be released today.

World oil prices are rising today for the third day in a row. Investors are expecting fuel demand to grow after a number of states in the US decided to ease the Covid-19 quarantine. The US Centers for Disease Control and Prevention reported that 100 million Americans have received coronavirus vaccinations. The UK and EU announced they are open to foreign tourists. Independent American Petroleum Institute announced a decrease in US oil reserves for the week by 7.7 million barrels