Market Analysis

Euro hedged up, European Central Bank very unlikely to hike interest rates

 

 

 

FOREX

The euro hedged up during early Tuesday trading, remaining nevertheless close to the minimums of Monday, when it touched levels not seen since May 2020 in relation to the dollar. The war in Ukraine is creating serious headwinds for the single currency, with Europe appearing particularly vulnerable to the conflict’s economic fallout. Against such a backdrop the European Central Bank is now very unlikely to hike interest rates this year, despite the growing inflationary pressures, creating scope for further euro weakness in relation to other major currencies.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

OIL

Brent oil prices approached $128 per barrel during early Tuesday trading, as concerns grow over the disruption of Russian oil exports. The US is hinting at the possibility of banning imports of Russian oil, with Moscow threatening to retaliate by suspending gas exports to Europe, a move that could trigger a complete Western blockade on Russian energy exports. Amidst a very tight energy market, the withdrawal of the 7 million barrels a day exported by Russia could have a devastating effect and end up driving prices to unprecedentedly high levels. That scenario is creating anxiety in the market and, as geopolitical tensions flare up, there may be scope for further price spikes.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

GOLD

Gold prices hit a fresh 18-month high during early Tuesday trading, reaching $2,020. The precious metal may soon test the all-time maximum of $2,075, reached in August 2020, as the flight to safety intensifies. The economic fallout from the war in Ukraine is worrying market operators, with the growing likelihood of Russian oil and gas either being boycotted by western powers or withheld by Moscow as retaliation for other sanctions. With commodity prices rising, and the threat of a 1970s-like energy crisis becoming more real, the scope for central banks’ tightening is reduced, in a dynamic that could drive inflation to dangerous levels and trigger a global recession. As the stagflation scenario becomes increasingly plausible, the appeal of gold is likely to remain high.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 
European shares traded significantly higher on Monday morning, with almost all sectors in the green as buyers keep on defending major support levels. Utilities and financials were among the top performers in Europe while real estate and communication services were the only sectors in the red as investors digest the ongoing diplomatic talks between Ukraine and Russia. Despite little progress registered so far, the ceasefire and open talks seemed to be enough to help stall the sell-off on riskier assets for now. A wait and see stance now prevails, as investors cautiously monitor the situation and keep some “dry powder” in case of a significant breakthrough, as the recent sell-off  has pushed share markets much cheaper. That said, even if military actions have stopped for now, the war continues on the economic front as both Russia and the US still consider further sanctions on each other, targeting Russian oil imports as well as Russian natural gas supply to Europe. Finally, all eyes are likely to be on the Fed over the coming days and weeks as investors watch how Central Banks move forward with monetary tightening in such an uncertain environment in the short- to mid-term. Despite bull traders currently defending technical support zones, all these hazy market drivers are likely to keep on weighing on market sentiment, increasing volatility and sharp price action across all asset classes in the very short-term.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

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