OIL
Oil prices fell during early Monday trading as investors brace for this Wednesday's monetary policy decision from the Federal Reserve. The consensus amongst analysts is that the central bank will keep interest rates on hold, but observers will focus on the tone used to deliver the announcement. Should the Fed hint at further rate hikes later in the year, as many now expect, there could be further downside for the price of the barrel. This is because crude is priced in dollars, and a stronger greenback means a lower nominal value. At the same time, US monetary policy is important not just for the world's largest economy but also for the rest of the world. Should the Fed continue to focus on fighting persistently high inflation through stringent monetary tightening, it will eventually achieve its objective, but the side effect will be an economic slowdown. It's this perspective of a Fed-driven decline in demand that is now being discounted by investors, creating a downside for oil prices.
Ricardo Evangelista – Senior Analyst, ActivTrades
EUROPEAN SHARES
European shares were on the rise on Monday morning, kicking off the week on a positive note, as traders await the Federal Reserve, BoJ, the Chinese Central Bank and ECB's decisions on rates. Most benchmarks edged higher on Monday, with financials, industrials and consumer cyclical shares leading the way up as appetite for riskier assets strengthened amid dovish bets from investors. We expect market volatility to keep increasing as we get closer to the central banks' meetings everyone expects this week, as optimism towards the prospect of a tightening "pause" or "pivot" from the Fed could be counterbalanced by lingering monetary uncertainty from the old continent.
In addition, and despite the recent change of narrative from Fed officials, most investors also remember they have been surprised by rate hikes from both the RBA and BoC, a scenario not completely ruled out for this week's meetings, especially in Europe.
The STOXX-50 traded more than 30 points higher this morning, close to its 4,335.0pts resistance, a level previously seen at the beginning of June.
As previously stated, we don't expect the market to clear major resistances before the central banks' meetings, and both 4,335.0pts and 4,355.0pts should keep capping prices until investors are provided with more clues on where monetary policies are going.
Pierre Veyret– Technical analyst, ActivTrades
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