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US English

War in Europe clouds Fed’s potential rate hike

By Joseph Toppe

19:39, 4 March 2022

US Federal Reserve chair Jerome Powell
US Federal Reserve chair Jerome Powell - Photo: Federal Reserve

US Federal Reserve chair Jerome Powell’s testimony before the American Congress on Wednesday did little to quiet speculation on Wall Street over how high the central bank would take interest rates later this month.

Powell called the Russian invasion of Ukraine a “gamechanger” and told lawmakers he was inclined to “propose and support a 25-basis point rate hike” but would be prepared to move more aggressively and raise the federal funds rate even higher, should inflation persist.

Changing strategy

Despite pandemic-related challenges to the American economy, George Mason University finance professor Derek Horstmeyer told, “The shift down in market expectations is primarily due to the uncertainties surrounding the war in Ukraine.”

He added that now, “The Federal Reserve can be slower with raising rates because of the expected drop in gross domestic product and inflation.”

With a strong labour market and inflation well above 2%, the central bank will raise the target range for the federal funds rate this month, Powell testified.


416.62 Price
+1.610% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 0.59


175.07 Price
+0.640% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 0.12


7.83 Price
-0.520% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 0.17


1.26 Price
-4.720% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 0.05

Trading perspective

In an interview with, Sarah Potter, chief education officer at the TradeStation Group, said traders are not only watching the upcoming Fed announcement and the war in Europe, “they’re reviewing their accounts and looking for ways to mitigate risk.

“Traders using mid-term time horizons might employ shorter timeframes to avoid being in the market longer than needed,” she continued. “Times like this call for an exit of positions with profit and to consider different trading tools, a move to less exposed markets and a diversification of risk.”

Options & premiums

Potter said traders should consider trading on a weekly basis, rather than monthly, to remove unnecessary risk.

“Traders who sell premium may be very excited about the moves while using spread strategies to take advantage of premium decay and relish in volatile markets,” she continued. “While instability may scare some, it provides opportunities to others.”

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

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