Global equity markets are likely to remain firmly gripped by geopolitical risk, as escalating tensions over the conflict in Syria weigh heavily on sentiment.

Geopolitical jitters have already punished Asian markets this morning, with Asia Pacific equities under pressure, following a weak lead from Wall Street overnight. In Europe stocks opened on a shaky note amid the growing caution among investors. With hawkish statements from the Federal Reserve and heightened political uncertainty around the US and Russia standoff leaving investors on edge, Wall Street could extend its losses this afternoon. Global equity bears are likely to remain in the vicinity as the terrible combination of geopolitical tensions and overall market anxiety sour appetite for riskier assets.

Dollar supported by Fed hawks

The Dollar held steady against a basket of major currencies on Thursday morning, after minutes from the Federal Reserve’s latest policy meeting were presented with a hawkish bias.

Market expectations over higher US interest rates this year have received a boost after the FOMC minutes revealed that all policy makers felt that the US economy would strengthen. With policy makers expecting inflation to rise in the coming months, the Federal Reserve may be forced to adopt a slightly more aggressive approach on rate hikes. A strong majority of policymakers viewed the prospects of a potential global trade war as a downside risk for the US economy. These concerns are likely to increase the Dollar’s sensitivity to the US-China trade developments moving forward. All in all, the minutes were pretty hawkish and reflected a strong sense of optimism among policymakers. After the FOMC minutes, the probability of a Fed rate hike in June jumped to 90%, according to CME’s FedWatch Tool.

While the Dollar could benefit from mounting expectations of higher US interest rates, lingering trade war fears and geopolitical tensions could spell trouble for the currency. From a technical standpoint, the Dollar Index remains at risk of trading lower if bulls are unable to secure control above 89.50. Sustained weakness below 89.50 could result in a decline towards 89.00.

Commodity spotlight – Gold

Gold was under pressure on Thursday morning, after hawkish minutes from the Fed’s latest policy meeting boosted expectations over a faster pace of US interest rate hikes this year.

Although the yellow metal may find itself exposed to downside risks in a high interest rate environment, losses could be limited by risk aversion. With geopolitical risk, US-Russia political uncertainty and lingering trade war fears still weighing on sentiment, Gold, which is often popular in times of financial uncertainty, is likely to remain supported. Taking a look at the technical picture, the yellow metal has retreated from an 11-week high, with prices trading around $1348 as of writing. Previous resistance around $1340 could transform into a dynamic support that can encourage an appreciation back towards $1360. A failure for bulls to maintain control above $1340 could result in prices sinking towards $1324.