Investors await Fed's minutes

As the Ukraine geopolitical risk eased overnight Wednesday, the dollar index lost ground, but the expectation of an aggressive Fed hike cycle keeps the dollar in place.

The focus of investors was likely to shift to economic and monetary policy developments amid speculation that the Federal Reserve may raise rates by a full 50 basis points in March.

Events of the day

On Wednesday, there are several events that may be worth keeping an eye on, including the release of the minutes of the Federal Reserve's January policy meeting, as well as the release of retail sales data from the United States. Also, consumer inflation data from the United Kingdom and Canada are included in the calendar.

FOMC minutes is the primary market mover today

As a result of the Russian threat against Ukraine and the soaring inflation rate, US Treasury investors are finding themselves squeezed between a rock and a hard place. In this way, all of this has led to the much-dreaded flattening of the yield curve, a sign that may suggest a slowdown in the economy or even a recession when the yields on short-term Treasuries start yielding more than those on long-term Treasuries in a phenomenon called an inversion.

It is also expected that bond investors will be closely scrutinizing the minutes from the Fed's January meeting released on Wednesday. This will provide clues about the runoff of the Fed's bond portfolio. The Fed is believed to be able to forestall an inversion in bond yields by selling off longer-term bonds, depressing bond prices, and boosting bond yields at the same time.

Global economic growth is glooming.

Having studied the preliminary estimates for the gross domestic product (GDP) for the first quarter of this year, it appears that the US economy - the biggest economy in the world - is expected to grow at a much slower pace.

In the first quarter of 2022, overall momentum in the US economy is expected to decelerate dramatically after a stellar run in Q4 of 2021.

Inflation in China slowed

On Wednesday, the National Bureau of Statistics reported that China's producer prices (PPI) grew by 9.1% in December 2021 compared to a 10.3% growth rate in December 2021 and forecasts of 9.5%.

Also, consumer price inflation slowed year over year. The results from the NBS show that China's consumer price index (CPI) increased by 0.9% year-on-year in January, a slower growth rate than the 1.5% recorded in December and the 1% growth projected by Investing.com.

CPI growth in January was 0.4% month-on-month, compared to December's 0.3% decline. However, it was slower than the 0.5% growth forecast.