New support for the dollar, amidst a drop in risk appetite
The US dollar is finding support during early Thursday trading, amidst a drop in risk appetite that favours its safe haven appeal. Disappointing earnings and an uncertain outlook for Meta, the firm behind names such as Facebook and Instagram, darkened the mood in the markets, generating some anxiety over the tech sector as a whole. Meanwhile, the euro is trading almost flat in relation to its peers, ahead of the conclusion of this month’s ECB meeting and rate decision. The ECB is expected to leave its policies largely unchanged, but investors will pay close attention to Christine Lagarde’s press conference, should there be any clues over a potential hawkish tilt; inflation in the eurozone was 5.1% during January, leaving the ECB with the dilemma of having to control the rise in consumer prices without undermining economic growth. Any signs of appetite amongst ECB officials for earlier than previously expected tightening should provide euro bulls with a good trading opportunity.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets saw mixed performances Thursday morning, as positive performances in London, Frankfurt and Paris pared declines registered in Copenhagen, Stockholm and Madrid. Risk appetite has halted today as yesterday’s disappointing earnings from Meta Platforms and Spotify as well as the incoming key meetings from Central banks helped investors taking a break from riskier assets.
Both FX and Stock traders are likely to keep a specific attention on what the ECB and the BoE announce today, especially after the last EU CPI print showed another increase with a 5.1% figure. Many market operators wonder if the BoE and the ECB will follow the hawkish pivot started a few months ago by the Federal Reserve or if the dovish stance will continue. With investors waiting for more clues as to where the UK and the EU monetary policies will go, no strong market directionality will be expected prior to today’s announcement, although volatility spikes may still take place through the day. Meanwhile, on the other side of the Atlantic, investors were surprised to see the US labour market shrinking following the latest ADP report for January. This situation has sparked bets on whether this negative impact, likely caused by Omicron, will be temporary or remain for a longer period. Investors expect more hints to be provided by tomorrow’s US unemployment rate and Non-Farm Payroll data.
Pierre Veyret– Technical analyst, ActivTrades
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