Market Analysis

British pound hedging up after UK inflation numbers release

FOREX

The British pound is hedging up against the dollar and the euro, following the release of UK inflation numbers earlier today. The data showed that consumer prices rose by more than 10% during the month of July, in a new multi-decade record that leaves the bank of England with few alternatives besides hiking interest rates by another 50 basis points when it meets again in September. This perception meant that sterling’s gains over the dollar and the euro were substantial immediately after the release of the data. However, as trading went on, most of those gains were lost as the markets consider what can be the full meaning of this high inflation number. With the British economy heading towards recession and the BoE forced to raise interest rates, the scenario is worrying and likely to eventually lead to further losses for the Pound in relation to other major currencies.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 
European shares opened mixed on Wednesday, following on from a strengthened market sentiment in Asia, but also reflecting a slower appetite for risk towards US futures.

The positive mood in Asia mostly came from China as Beijing is set to potentially unveil more stimulus measures, in order to bring consumer and investors’ confidence back and counter the negative effects of the Covid-Zero policy more efficiently. However, the situation is different in Europe and the US, as investors remain torn. On the bullish side, there is the boost provided by a strong batch of corporate results combined with a finally decreasing price pressure, which support market sentiment. On the other hand, most investors have a big question mark regarding where unprecedented monetary policies are going. More and more traders are starting to believe the aggressive rate hike path could seriously damage growth and economies in the long run, while the new European Bond buying programme is still seen as a massively inflationary mechanism.

More clues may be provided today with the highly awaited publication of the minutes from the last FOMC meeting.

Meanwhile, most EU benchmarks are slowing their bullish trend as prices approach major mid-term resistances. The Stoxx-50 index is now trading inside a threatening rising wedge, typically seen as a reversal chart pattern, with less and less powerful highs and lows, while bearish divergences have already been registered by both the RSI and the MACD indicators.

Pierre Veyret – Technical analyst, ActivTrades

Source: ActivTrader

 

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