Most EU benchmarks held their gains on Tuesday
The pound is trading almost flat versus the US dollar as Tuesday’s session gets underway in Europe. The markets appear to be reassured by the new UK chancellor’s U-turn on an enormous unfunded fiscal stimulus package announced by his predecessor. Sterling bounced back against the dollar, following Monday’s announcements by Jeremy Hunt, where he committed to reverse almost all the tax cuts lined up by the previous chancellor. Hunt also withdrew the commitment to an ongoing energy price relief policy, refusing to confirm any extension beyond April. With the size of the UK’s fiscal hole reduced by two thirds, the markets seem less concerned with the immediate future of the British public finances, resulting in more support for sterling. The currency also benefited from reports in the media suggesting that the Bank of England will hold back on the reduction of its balance sheet until the bond market is more settled.
Ricardo Evangelista – Senior Analyst, ActivTrades
Most EU benchmarks held their gains on Tuesday, extending the bullish sentiment confirmed overnight in Asia, as the rebound continues.
Investors keep pushing stock indices higher following the rebound over the annual lows at the end of last week, and growing risk appetite can now be seen across different asset classes such as treasuries, currencies, and equities. As the fundamentals haven’t significantly changed yet, and threats such as high inflation, slower growth, tighter liquidity, and the energy crisis remain on the table, this is still seen as a technical correction. Markets are slowly approaching key resistance levels, with the STOXX-50 now trading close to the 3,510/3,530 zone, at the contact of its mid-term bearish trendline where the possibility of a bearish trend resurgence lays. Volatility is likely to rise as we approach these key levels for EU indices, especially as the next CPI report looms tomorrow. For now, traders will probably stay focused towards today’s ZEW Economic Sentiment Index data as well as corporate results from Netflix Inc, Goldman Sachs Group Inc and Jonhson & Johnson, among others.
Pierre Veyret– Technical analyst, ActivTrades
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