FOREX
The US dollar index, which measures the performance of the American currency versus its peers, is trading almost flat for the third consecutive session, ahead of the release of US inflation figures later in the day. The greenback remains close to seven-month minimums, but hasn’t moved significantly since Monday, reflecting the mood of wait-and-see that has taken over the mindset of dollar traders. Expectations that the Fed will adopt a more benign approach to monetary policy have been gaining traction among investors, as recessionary worries replace inflation as the leading narrative in the markets. This dynamic, which has been taking hold over the last few months, helps explain the dollar decline registered since October. Today’s release of US inflation numbers for December could further cement this view, especially if it reads below the expected 6.5%, and create scope for further dollar weakness.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stock markets continued to climb globally on Thursday, as all European benchmarks extended gains ahead of the highly awaited US inflation report.
The general sentiment remains clearly bullish this week as investors keep pushing riskier assets higher, boosted by easing recession worries and the prospect of a “soft landing” from the Fed.
However, this sentiment may change in the afternoon as all eyes will be on the next inflation print where a decrease from 7.1% to 6.5% is widely expected.
Even though any decrease in price pressure would be considered as good news, much of it has already been priced-in, and we don’t expect any significant and directional price action if today’s figure comes inside the 7.1% / 6.5% window.
However, a number below 6.5% or above 7.1% should dramatically affect market sentiment, and could cause significant very short-term disturbances to FX and equity markets.
That said, the DAX-40 index remains as the top EU mover for today, with prices trading slightly below the 15,000 pts mark. The next target is located inside the 15,115 pts / 15,135 pts zone, while a reversal in the current bullish environment, triggered by poor inflation numbers this afternoon, could drive prices back towards the 14,840 pts area.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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