(Reuters] -The U.S. Federal Reserve will host policy meetings, along with the Bank of England and Reserve Bank of Australia.

China could be suffering from a poor economic outlook, which would put additional pressure on the Yuan. Russia is avoiding a default for the moment.

Was anyone able to say dollar?

This is a preview of the markets for week ahead from Tom Westbrook (Singapore), Ira Iosebashvili (New York), Dhara Ranasinghe and Sujata Ro in London.

1.THE HAWKS FLY

A growingly negative Fed rhetoric has caused sell-offs in bond and stock markets. We will be able to see how aggressive the central banking plans to become over the next few months on Wednesday.

On May 4, the Fed announced a 50-basis point interest rate increase. Investors are expecting a massive 240bps of tightening in monetary policy by 2022. As it works to curb the most severe inflation since 1940, many believe the Fed will surprise again on the hawkish end. [L2N2WK2GX]

The Fed’s plan for the nearly $9 trillion in balance sheets, which could be unwinding by May, will attract market attention.

2.FOUR IN A ROULE

A day after the Fed’s meeting, it is expected that the Bank of England will raise interest rates for the fourth consecutive time. This would be the first time since 1997.

Andrew Bailey, BoE chief, says that the bank has a tight balance between reducing inflation (which at 7% exceeds its target) and trying to avoid a recession.

The BoE must first sell bonds that it owns by requiring a quarter-point increase to 1%. Markets are still unsure when they will sell their bonds. Estimates range from June through well into 2023.

While active bond sales could tighten monetary conditions, they can also hurt an economy that is struggling. No central bank has started this process.

3.DOLLAR THE DISASTER

April is considered the worst month. It’s been for everyone on the wrong end of the dollar trade.

A rise of 5% in the safe-haven flows, and an extremely hawkish Fed have triggered huge falls in the euro- and yen as well as other emerging market currencies led by the Yuan.

Global financial conditions are becoming more tight, and this can lead to slower economic growth. Japan, Germany, as well as other nations are facing higher import prices for dollars-priced components and materials.

Past Fed tightening cycles had a negative impact on the U.S. dollar once they began. Here are some comparisons to 1994. After a 10.5% increase in 1993, 300bps rate increases lifted the dollar index 4.6%. These moves are responsible for the subsequent wave of emerging market crises.

4/CHINA TO AUSTRALIA

After Sunday’s data revealed that factory activity declined at an even faster pace in April in China’s second-largest economy, the yuan fell 4%. This was due to widespread COVID-19 lockdowns, which halted production and disrupted supply chain. There are fears of a severe economic slowdown, which could impact global growth.

Beijing seems to be focusing on the yuan for its primary policy tool, much to disappointment for stock markets, which had expected more government assistance. China’s slowdown applied a discount to the quarry which caused the dollar to drop 4.5% through April.

A recent report showing that Australian inflation rose to 20 year highs in the first quarter of 2018, is indicating that there could be a new hiking cycle. Many economists and swaps pricing experts believe a rate increase of 15 bps is possible.

GAS & DEBT

Moscow is stepping up its confrontation with Western capitals regarding gas shipment payments. Following their refusal to take its request for payment in roubles, Moscow cut off gas supply to Bulgaria and Poland.

Although the European Commission warned that Russian rouble payments may violate sanctions, officials still struggle to determine what position the European Union has on Moscow’s payment scheme.

Germany is the elephant in the room – Russia gas accounts for around one third of Germany’s total gas consumption, and the economy may slip into recession if supply cuts are made.

Russia sent a last-ditch payment in U.S. dollar to evade a possible sovereign default that was looming Wednesday. Washington’s top official said that the payment was made using US frozen reserves.