Market Analysis

The US dollar is trading flat against the other major currencies

FOREX

The US dollar is trading flat against the other major currencies during the early part of Thursday’s session, after Wednesday’s fall from multi-month highs. The greenback’s loss of steam results from a deceleration in inflation revealed by yesterday’s release of CPI numbers. US consumer prices rose by 0.5% in July, dropping from the 0.9% recorded in June, in what is the most significant drop in month-to-month inflation for over a year. These developments offer some support to the view held by some at the Federal Reserve that the spike in inflation was transitory rather than structural as well as cooling down the impetus of those investors who had been anticipating the tightening of policies by the central bank. The tightening is still likely to occur, given the positive signs from the labour market, but perhaps with less urgency than had been anticipated, taking some steam off the recent dollar vitality.

Ricardo Evangelista – Senior analyst, ActivTrades

 

OIL

WTI stabilized during early Thursday trading, following the gains of the previous two sessions. The situation in Asia, where demand for fuel is likely to be impacted by new restrictions on movement put in place in China, alongside yesterday’s request from US President Joe Biden calling on OPEC+ to increase output in order not to damage the global economic recovery are preventing prices from rising.

Ricardo Evangelista – Senior analyst, ActivTrades

 

EUROPEAN SHARES 

European stocks followed the Asian trend by opening lower ahead of another busy day. Today’s market sentiment was dented by China’s continued regulatory crackdown, temporarily offsetting yesterday’s enthusiastic trading mood after data showed US inflation easing. While consumer prices remain high in the US, yesterday’s figures confirm the Fed’s view about the transitory effect of inflation, which should continue to sustain the stock rally over the medium term. However, between the global recovery, the spread of the Delta variant weighing on some nations and major regulatory changes in the world’s second biggest economy, traders have a lot to digest and are now wondering how high can stocks go? This question feels particularly pertinent as most benchmarks have been trading near record levels for a significant period now. While some traders continue to ride this bullish wave, others have already started to hedge their portfolio against any potential decline, which explains the current rotation from growth stocks (tech shares) to cyclical values.

Pierre Veyret– Technical analyst, ActivTrades

 

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