Market Analysis

The Dollar is rising during the early part of Tuesday’s session

FOREX

The US Dollar Index is rising during the early part of Tuesday’s session, as investors weigh the risks posed by the Omicron virus variant against Jerome Powell’s enhanced hawkishness. The Chair of the Fed, who until recently had been firmly on the side of ‘team transitory’, surprised observers during a testimony to the US Senate, hinting at the need to accelerate the pace of tapering and saying that transitory is no longer an adequate description for inflation. Mr. Powell’s assessment was that the impact of Omicron will be less severe than that of initial variants of the virus, with inflation remaining, at least for now, the main concern for the American central bank. Investors reacted cautiously, with the dollar finding some support but with the upside capped by fears over the potential impact of the new variant on the economic recovery.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

GOLD

Gold is almost flat during the early part of Wednesday’s session, despite the surprisingly hawkish stance of Jerome Powell during a testimony to the US Senate late on Tuesday. Investors appear to be taking the words of the Chair of the Fed with a pinch of salt, after he hinted at the need to accelerate the pace of tapering and dismissed the term ‘transitory’ as no longer appropriate to describe inflation. Normally, such words would have given the dollar a big boost, however, investors remain concerned over the potential impact of the Omicron variant on the economy, a scenario that is supportive for the safe haven gold.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 

Share markets followed the Asian trend by opening higher in Europe on Wednesday after a bit of relief came from reassuring regional macro data. Stock prices are now stabilizing following the sharp sell-off caused by fears over the new Omicron strain, as investors shifted their focus towards macro news while waiting for more developments about this new variant. Monetary policies, especially from the Fed, remain at the centre of everyone’s mind at the moment. The latest hawkish switch from Jerome Powell took many by surprise and sparked uncertainty among investors, leaving them sceptical about the Fed’s next move. While taking hawkish measures to tackle a “not-so-transitory” inflation is generally seen as positive news, investors wonder how dangerous it could be to withdraw the current strong monetary support while the US economy is still struggling. That said, the focus for today at least will be on a series of macro releases including the EU PMI, the US ISM as well as the Fed’s Beige Book.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

 

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