The dust seems to be settling in cryptocurrencies. Terra and Luna are now worth almost nothing but Bitcoin returned past the $30K, which is a sign that the confidence in the broader sector may have not been damaged as much as we first feared.

European stocks opened in the green and US futures are pointing to the upside, yet volatility remains high, warnings that the wind could change direction rapidly, and the high volatility environment is more favourable for further losses than sustainable gains.

On the geopolitical front, the Europeans are going around their own sanctions against Russia by opening accounts with Gazprom bank to pay the Russian gas in exchange of rubles (!!), but the latest news suggest that Russia is now cutting the German gas as a retaliation to its sanctions.

Of course, the Europeans have been quite bad in this poker game - they showed too openly how scared they were to lose the Russian gas that now, Russia is gaining the upper hand.

European gas futures gained another 13% yesterday, and the pressure on energy prices remain clearly tilted to the upside.

Saudi Aramco has surpassed Apple in terms of market capitalization this week, to become the world’s most valuable company, and the US dollar index extended gains to a fresh 20-year high.

Everyone is now wondering when the dollar rally will end!

US inflation data didn’t print a soft-enough figure to reverse the market selloff.

Disappointing US inflation data sent another shock wave to the US stock markets sending all major US indices tumbling on Wednesday. The S&P500 lost more than 1.5%, while Nasdaq tumbled more than 3%.

Bitcoin slumped below the 2021 lows on the back of a broad-based risk-off selloff, and panic due to TerraUSD losing its dollar peg earlier this week.

The US dollar remained upbeat, and the dollar index returned above the 104 mark as the lower-than-expected cool down in the US inflation figure revived the Fed hawks.

The pound-dollar is testing the 1.22 this morning as the UK-European relationship is souring on the Northern Ireland headache.

Gold rebounded from the 200-DMA, as the US 10-year yield eased despite yesterday’s higher-than-expected inflation print in the US, as US crude saw a decent dip buying interest below the $100 per barrel, even with the souring prospects of a healthy global economic recovery.

It’s D-day of the week: we will see whether inflation in the US started easing in April after hitting a four-decade high in March, and if yes, by how much.

A soft inflation read will come as a relief that the Federal Reserve’s (Fed) efforts to tame inflation start paying off, but any disappointment could send another shock wave to the market.

For now, activity on Fed funds futures give almost 90% chance for a 50-bp hike in FOMC’s June meeting; there is a lot left to be priced for a 75bp hike, if the data doesn’t please. To avoid pricing in a 75bp hike at next FOMC meeting, we must see an encouraging cooldown in inflation.

In the FX, the US dollar extended gains, despite the easing yields yesterday, as the risk-off flows continued supporting the greenback. The levels against the majors like euro, yen and sterling remained flat, but the positive pressure in the dollar, combined with Turkey’s unconventional monetary policy start giving signs of exhaustion. The dollar-try advanced past the 15 mark, and the government asked institutions to make their FX operations within the most liquid trading hours. Two weeks ago, the bank had revised its regulations on banks' reserve requirements, applying them to the asset side of balance sheets in order to strengthen its macroprudential policy toolkit. The latter required reserves now pressure the overnight rates to the upside – suggesting that the unconventional policy is near limits.

Energy are up and down… but mostly up. The barrel of US crude tipped a toe below the $100 level on news that the Europeans softened their sanctions proposal against the Russian oil, but oil is already above the $100 this morning. The upside potential is fading due to slower global growth prospects, and the Chinese lockdown.

The selloff in stocks, bonds, and Bitcoin deepened on Monday. Even commodities sank and crude oil tumbled more than 8% on the back of mounting worries of a seriously tighter, and potentially ineffective Federal Reserve (Fed) policy that would, to fight back the skyrocketing inflation, pull back support aggressively enough to cause recession. Goldman says the S&P500 could fall to 3600 in case of contraction.

Another worry is that, even with a significantly tighter monetary policy, the Fed may not be able to tame inflation as much as desired. This is what the inflation expectations tell us.

The S&P500 dive another 3.20% yesterday, as Nasdaq tanked another 4.30%.

And money doesn’t flow to ‘safer’ US sovereign bonds, as investors are rapidly unloading the US treasuries as well, given the Fed is now letting its holdings mature to reduce the size of its balance sheet which went through the roof since the 2007 subprime crisis.

The US 10-year yield hit 3.20% yesterday, the highest level since November 2018.

Gold lost more than 1.50% along with the everything rout yesterday and Bitcoin slipped shortly below the $30K level. The yen and the Swiss franc depreciated against the US dollar, as well.

So, where does the money go? To the US dollar – the safest of the safe haven assets.

But, there is one potential catalyzer this week, that could eventually slow down the market selloff: US inflation data due Wednesday. The consumer price index is expected to have eased to 8.1% in April from 8.5% printed a month earlier. A softer inflation is the only thing that could give hope to investors.

Last week closed on a negative note, as US NFP data came in stronger-than-expected, revived Federal Reserve (Fed) hawks, and sent the major US indices lower. And the new week starts on a negative note, as well, after the Chinese Li Keqiang warned that the jobs situation in China is getting ‘complicated and grave’ as the government’s zero Covid policy is taking a heavy toll on the country’s economy, and impacts the rest of the world negatively, as well.

But US inflation print due Wednesday could help improving investor sentiment this week, if the data confirms a slow down in US inflation from multi-decade high levels.

Oil is up this Monday on G7 commitment to ban Russian oil, but Saudis cut the price of their oil due to the Chinee slow down.

The US 10-year yield gains field above 3% mark, and US dollar consolidates near two-decade highs.

Bitcoin dived to the lowest levels since January over the weekend. The next natural target for Bitcoin bears is the $30K psychological support.

The only thing that could reverse the dollar appreciation against majors, and Bitcoin is a soft inflation read on Wednesday!

The Federal Reserve (Fed) ‘magic’ didn’t last long, and the US stocks recorded the worst day of the year yesterday, after posting the biggest gains of the year the day before, under the pretext that the Fed wouldn’t raise the rates by 75bp points.

Bitcoin didn’t resist to the risk selloff and dived near $35500 mark for the first time since February. Even Gucci’s announcement that it would accept payments in cryptocurrencies couldn’t improve the mood.

Energy stocks did better than their peers yesterday, as the barrel of US crude extended gains past the $110 on the back of timid production target increase from the OPEC, and the European plans to ban the Russian oil and gas gradually to the end of the year.

Now, all eyes are on the US jobs data. Even though the Fed will turn a blind eye on softening jobs data in the coming months to focus on its fight against inflation, a strong NFP data could further revive the Fed hawks and the prospects of more aggressive Fed over the next couple of meetings, whereas a soft data could bring in some Fed doves.

US dollar remains strong, EURUSD is down below 1.06 on scary plunge in German factory orders, Cable is hit by higher inflation and sooner recession warning, and Turkey is hit by 70% (official) inflation.

The Fed raised the interest rate by 50bp for the first time since 2000 and said there will be more 50bp hikes in the coming meetings. And the major US indices rallied as the Fed played down the possibility of a 75bp hike.

That’s the magic of expectations.

The reduction of the Fed balance sheet will start with an initial combined amount of $47.5 billion and reach the $95 billion level within three months.

The S&P500 rebounded 3%, as Nasdaq rallied 3.40% higher and European futures gained 2% in the overnight trading session, but gains remain vulnerable as oil prices continue rising on news that the Europeans will abandon the Russian energy into the end of the year.

OPEC decision, on the other hand, will probably bring no relief to the oil market.

Elsewhere, the Bank of England (BoE) is also expected to raise its policy rate by 25bp to 1% at today’s monetary policy meeting to tame the rising inflation in Britain, but it will hardly reverse the negative trend in Cable.

Gold is up to $1900 per ounce, but remains under the pressure of rising US yields, while Bitcoin recovered close to $40K psychological mark, but the hawkish Fed expectations may not let the bulls take the reins of the market.

Investors are holding their breath before today’s FOMC decision. The Federal Reserve (Fed) is expected to raise the interest rates by 50bp for the first time in two decades, and start reducing its balance sheet by $95 billion per month to tame the rising inflation in the US.

While the 50-bp hike is fully priced in, there is a chance for the Fed to get more aggressive and hint at a 75bp hike in a future meeting, despite the economic indicators that start showing signs of slow down. Inverse ETFs on Treasuries are interesting for those willing to bet for higher US yields.

Data-wise, the latest jobs data will throw light on what happened in the US jobs market in April, and the expectations are strong.

It is, of course, not a surprise that we see the US dollar continue strengthening, as besides the tighter Fed expectations, the safe haven flows support the greenback in the actual high economic and high geopolitical risk environment.

Elsewhere, oil remains upbeat into the OPEC decision, the energy stocks continue benefiting from soaring prices despite the Russia disruption, while the S&P500 companies show better-than-expected average earnings, despite some high-profile disappointments including Netflix and Amazon.

Netflix dived more than 35% at yesterday’s trading session, as the unexpected announcement that the company lost 200’000 subscribers in the first quarter and lose 2 million more didn’t please investors although the latest quarterly revenue hit a record of $7.9 billion, up by $2.4 billion compared to the pre-pandemic levels. Is Netflix a buy? Why, and why not?

Tesla, on the other hand, rallied more than 5% post-market on the back of strong quarterly results, after the company reported better-than-expected results. Unlike Netflix, Tesla clients didn’t walk away due to higher car prices; Tesla could pass on the higher costs, due to rising raw material prices and the supply chain crisis, on to its customers.

Zooming out, besides Netflix which weighed heavily on Nasdaq and pulled the index more than 1% lower yesterday, most US stocks rose.

US and European futures trade in the positive before the European open, yet the escalating tensions with Russia could hit the sentiment, as Russia test-fired a new intercontinental missile that could carry multiple nuclear warheads.

In commodities, the positive pressure in oil prices is fading, but the buyers pile in approaching the $100pb level, as the supply side problems weigh heavier than the demand side easing.

In the FX, the US dollar softens, as investors will be listening to Fed Chair Powell, ECB President Lagarde and the BoE Chief Bailey speaking today.