The US dollar Index is hedging up as Europe’s Wednesday session gets underway
The US dollar Index is hedging up as Europe’s Wednesday session gets underway. This pause for breath comes after a losing streak that saw the greenback drop more than four percent, from the maximum reached in late September in relation to its peers. The recent dollar losses occurred as market sentiment shifted. The headwinds facing the global economy, with an expected pronounced slowdown in growth during the months ahead, may force the Federal Reserve to pivot on its current hawkish stance and reduce the pace of tightening. This is the scenario that the markets have been pricing in over the last few days, offering support to bonds and consequently driving yields down, in a dynamic that also delivers a weaker dollar. However, the shift in market sentiment is limited as investors are mindful that strong employment numbers – which are due to be published this Friday – would support the continuation of the aggressive tightening policies by the Fed; a scenario where the dollar would almost certainly regain the front foot.
Ricardo Evangelista – Senior Analyst, ActivTrades
European shares fluctuated following the opening bell on Wednesday, with market sentiment taking a break as investors await further macro developments.
Most benchmarks were trading sideways this morning, holding their gains following the best weekly start in months for equities and ahead of another day full of important macro news.
The bullish enthusiasm sparked at the beginning of the week, after the RBA brought hopes of a peak in monetary tightening, is slowly fading and investors now need to witness confirmation from other central banks to fuel the rally further.
That said, the situation isn’t really threatening yet from a technical point of view as stock indices remain above key support levels so far, highlighting the “wait and see” trading stance today.
Investors are cautiously waiting for a batch of PMIs from Eurozone countries today, alongside the OPEC+ meeting where a major oil output cut is to be discussed, while officials at the Federal Reserve and the RBNZ will be giving speeches later in the afternoon.
Pierre Veyret– Technical analyst, ActivTrades
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