European markets pared gains and even registered further losses on Thursday
As Thursday trading got underway in Europe the pound found itself once again on the backfoot. Sterling had posted the largest daily gain in relation to the US dollar since June during the previous session, following the announcement, by the Bank of England, of an emergency bond-buying programme aimed at rescuing a rapidly sinking UK bond market. The economic policies announced by the Government at the end of last week appear to have been broadly frowned upon by the markets, with concerns over the future performance of the British public finances, which many see as likely to be hampered by a massive fiscal stimulus programme, launched alongside tax cuts, at a time of heightened inflation. Such concerns remain at the forefront of investors’ thinking and today’s currency losses will increase the pressure on the BoE to substantially hike interest rates and halt sterling’s freefall.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets pared gains and even registered further losses on Thursday, following a global trend, as a risk-off trading stance remains well in place in investors’ minds.
Market sentiment stays significantly weighed down by rising uncertainty, brought to the markets by higher borrowing costs, elevated price pressure and the prospect of an economic downturn.
Beyond that, though, something even more concerning is currently taking place; investors seem to be increasingly losing confidence in the ability of Central Banks to control the situation. This is especially true in the UK where bonds, stocks as well as the GBP currency are all nosediving despite the latest attempt from the BoE to stabilize the situation and keep cash in the financial markets with its new bond buying intervention.
This situation is really threatening to many asset classes and further lows before year-end remains as the most likely scenario for stocks unless investors witness a strong positive change in the fundamentals.
Today’s trading session will be focused on a batch of speeches from ECB officials, the GDP and initial jobless claims data from the US in the afternoon as well as the highly awaited PMI number from China due later in the evening.
Pierre Veyret– Technical analyst, ActivTrades
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