GOLD
Gold prices dropped during early Tuesday, approaching the yearly lows touched on Friday. Investors are bracing ahead of the release of the latest FOMC minutes and also a number of public speaking appearances by senior Fed officials later in the week. The precious metal has so far had a difficult February, with a drop of almost 5%, following the shift in market expectations over the Federal Reserve’s monetary policy. A string of economic data releases revealed a resilience in the US economy that perhaps many hadn’t expected, with inflation also remaining stubbornly high. Against this background, the likelihood of the Fed pausing on interest rate increases after March, and even cutting before the end of the year, is much lower now than it had been only a few weeks ago. As investors price-in the renewed hawkishness of the Federal Reserve, the dollar is likely to continue to strengthen, meaning there may be further downside for gold prices.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
European markets slid significantly lower on Tuesday, following a mixed trading session in Asia, while US futures on the S&P500 also point to a drift at market open.
Apart from utility shares, all sectors are lower in Europe, with the worst performances being registered by tech and basic materials stocks.
The lingering strength of both the single currency and the US dollar combined with decreasing bond yields in the US and EU underline the current risk aversion of investors.
It seems the latest batch of solid economic data has revived worries of a more hawkish stance from central banks regarding monetary tightening. Traders are already pricing in the possibility of bigger-than-expected rate hikes after latest economic indicators and corporate results continued to show more resilience than anticipated.
This decreased appetite for riskier assets such as equities is likely to remain in place until there is significant good news on inflation; this may come later this week for European stock traders as German and Eurozone CPI data loom on Wednesday and Friday.
That said, there is also a chance that investors may be selling the rumor, and seizing the occasion to pull-back on newly established support levels before getting back on track towards new market highs.
The STOXX-50 index is still trading inside its bullish channel, right above the lower bound, but the anticipated break-out registered by the RSI indicator may suggest the correction could go deeper towards 4,180.0pts, 4,095.0pts and 4,030.0pts by extension.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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