The dollar is losing ground following a surprise rate cut by the Chinese Central bank
The US dollar started the week on the back foot, following a surprise rate cut by the Chinese Central bank, which boosted risk related assets. The move by the PBOC offered support to risk related currencies, in a dynamic that penalized the dollar, seeing it lose ground to its peers, with the exception of the Japanese yen – the ultimate safe haven currency. Despite the rise in the yields of the benchmark US 10-year treasury note, which follows the markets perception that the Fed is likely to accelerate the pace of monetary policy tightening, the US dollar’s reaction has been subdued, due in part to the Fed’s hawkishness already being baked into the value of the greenback, and the return of risk appetite in global markets, which weighs down on the dollar.
Ricardo Evangelista – Senior Analyst, ActivTrades
European benchmarks opened mostly lower, with gains in London offset by losses in Stockholm and Copenhagen, despite bullish moves registered in Asia. While market sentiment improved overnight, due to reassuring GDP and Industrial Production figures from China as well as further dovish measures from the PBOC, European stocks remain trendless ahead of what is expected to be a quiet trading session. Lower volumes are widely anticipated today, due to the lack of significant data release as well as the absence of US stock traders for the MLK holiday today. However, volatility is expected to rise again this week as investors will cautiously monitor the opening of the earning season, curious to see how corporate results will cope with the impact of the Omicron variant spread as well as the prospect of a tighter monetary policy in the US.
From a technical point of view, the FTSE-100 index remains at the top of the EU benchmarks table today, led by miners and healthcare, with prices flirting with the 7,600 pts resistance. A clearing here could quickly drive the market higher towards 7,625 pts and 7,660 pts by extension.
Pierre Veyret– Technical analyst, ActivTrades
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