Market Analysis

Uncertainty about a possible monetary hawkish switch from the Fed

EUROPEAN SHARES 

Most European shares and US Futures traded slightly higher at the beginning of this new week, despite a mixed trading session for Asian benchmarks, as price stabilization continues. Investors still lack visibility on the short to mid-term outlook, especially while there is uncertainty about a possible monetary hawkish switch from the Fed. However, a wind of relief may blow the current “risk-off” trading stance away this week as concerns related to the Omicron variant may ease after South African experts didn’t register any surge in deaths or hospitalization. This news, if it were to be confirmed in the coming days, could have a significant bullish effect on most markets, inciting investors to buy the dip following last week’s panic sell-off. Macro data will of course remain as one of the top market drivers and investors are already wondering how the Fed could go further with its hawkish pivot following the poor jobs report published last Friday. Volatility is then likely to remain high this week with highly anticipated major data from the eurozone (GDP) and China (CPI, PPI etc), alongside speeches and decisions from US, Australian and Indian central bankers.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

FOREX

The US dollar is slowly recovering the ground lost at the tail end of November, with the Dollar Index now closer to its highest level this year than to the lows that followed the first reports of the new Omicron variant. The greenback is supported by mixed employment data published on Friday, which strengthened expectations that the Federal Reserve will accelerate the pace of monetary tightening. Even as the uncertainty caused by the new virus variant continues to dominate headlines, the overriding sentiment amongst investors remains centred around high inflation and the Fed’s recent hawkish tilt, a dynamic likely to support the US dollar in the runup to this Friday’s release of fresh US CPI data.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

OIL

WTI is rising during early Monday trading following the decision by Saudi Arabia to hike the cost of the oil it sells to the US and Asian countries. This decision comes amidst expectations that demand will remain high in the new year, and this, together with reports of an impasse in the talks between the US and Iran, is supporting the price of the barrel. Today’s price action comes on the back of last week’s decision by the OPEC+ cartel to maintain the increases in production for January, despite uncertainty over demand due to the emergence of the Omicron variant. However, today’s gains should not be interpreted as the beginning of a rally in prices, as uncertainty over the impact of the new virus variant on economic activity will cap the scope for further rises.

Ricardo Evangelista – Senior analyst, ActivTrades

Source: ActivTrader

 

 

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