Market Analysis

The US dollar is trading almost flat in relation to other major currencies

FOREX

The US dollar is trading almost flat in relation to other major currencies as the European session gets underway. The tone for the dollar narrative has recently been dictated by those who expect the Federal Reserve to reduce the pace and scope of its monetary tightening drive, creating a dynamic that saw the greenback devaluing almost 6% in relation to its peers over the last two weeks. However, in an unexpected twist, yesterday’s release of retail sales data revealed a surprise increase in US consumer spending, which may reset the mindset of investors and create scope for a dollar resurgence. It is also worth noting that on the same day, a senior Federal Reserve decision maker reiterated the central bank’s commitment to control inflation through higher interest rates, floating the idea that the terminal rate may end up being even higher than previously expected.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

EUROPEAN SHARES 
European markets edged moderately higher, alongside US futures, as bullish sentiment stays alive despite poor performances registered by Asian shares overnight and ahead of a busy day on the macro front.

Market sentiment remains supported by investors’ risk appetite as almost all EU benchmarks are trading in green territory, holding their recent gains above major support levels while traders brace for the next inflation report in the Eurozone.

This new CPI print, due later this morning, is expected to show a significant increase in price pressure (from 9.9% to 10.7%) which should keep pushing the ECB on tightening monetary conditions on the old continent. Of course, any number outside this 9.9%-10.7% range would be likely to cause important disturbance in riskier assets, brought by both lower liquidity and higher volatility. Meanwhile, we don’t expect any directional moves and the STOXX-50 index is likely to keep trading inside its 60-point range between 3,860.0pts and 3,920.0pts.

Elsewhere, traders are braced for US Building Permits, Initial Jobless Claims data as well as the Philadelphia Fed Manufacturing Index due later in the afternoon alongside speeches from FOMC officials as monetary policy remains one of the most important market drivers for stock investors.

Pierre Veyret– Technical analyst, ActivTrades  

Source: ActivTrader

 

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