Market Analysis

Oil prices dropped back from multi-year highs

OIL

Oil prices dropped back from multi-year highs late on Wednesday, after the Federal Reserve indicated its intention to raise interest rates faster than previously thought, triggering a dollar rally. With the Fed becoming hawkish, the dollar is likely to continue to rally in the days ahead, representing a headwind for oil and other commodities. Still, any losses were limited by the publication of US crude stockpile data, which indicated a steep decline due to rising demand from American refineries.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

FOREX

The Dollar Index has risen more than 1.2% since yesterday’s release of the latest Federal Reserve policy statement. The central bank surprised many investors by bringing forward the projected timing for interest rate rises, declaring that the majority of the bank’s policy makers expects two hikes in 2023, a year earlier than previously expected. This attitude contrasts with the Fed’s recent narrative of dismissing inflation as a transitory phenomenon and stubbornness to not deviate from its long-term plan. With the economy roaring back to life and prices rising, the markets reacted to the new hawkish stance by the Fed by triggering an immediate rise in bond yields and driving the dollar to multi month highs.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 

Shares in Europe mostly opened lower on Thursday, following the switch in market sentiment sparked by the release of the FOMC minutes of the last meeting at the end of yesterday’s US trading session. With many already expecting it, confirmation arrived that Fed officials started discussing possible tapering in June. Even if no significant change in monetary policy will take place in the short-term, the fact the Fed is considering how and when it will reduce its massive bond-buying program is an important milestone for traders and leads them to think we may be at the beginning of a new market cycle, especially for stocks and the dollar. No rate hike is expected before 2023 but investors may be tempted to switch some of their exposure to safer assets meanwhile, as it will certainly become more and more difficult to remain exposed to an asset class no longer supported by a central bank.

Source: ActivTrader

 

The best performance comes from Madrid where the IBEX-35 index remains one of the most resilient benchmarks of the old continent. However, despite the current bullish candle formed at the opening bell, the break-out of the mid-term bullish trendline has already happened. This inevitably increases the likelihood of an extended correction towards first 9,100pts and then 9,035pts unless investors manage to push the market back above the 9,250pts level.

Pierre Veyret– Technical analyst, ActivTrades

 

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