FOREX
The US dollar continues to strengthen versus other major currencies, hitting a three-week high as the European trading session got underway. After the euphoria that marked the last days of 2023, with the markets all but pricing in the quick unwinding of the Fed’s tightening, traders haven’t been able to shake off the new year’s hangover. The dollar index gained almost 2% since hitting a multi-month low at the end of December, as investors’ belief in a dovish Fed metamorphosed into uncertainty. On that note, today’s nonfarm payroll data may help undo some of that uncertainty. The markets know that the US labour market is crucially important for the Federal Reserve’s decision-making, and today’s data could, depending on the reading, either reinforce the greenback’s strong start to the year or restore the faith of investors that 2024 will be marked by several rate cuts. Against this background, today’s data release looks critical for the near-term performance of the dollar.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equities slid slightly lower in Europe at the beginning of the week's last trading session as investors brace for crucial macro data from the EU and the US.
Most market operators are maintaining a "wait and see" trading stance this morning, as all eyes are on today's EU CPI and US employment data.
These reports are seen as crucial as they should provide investors with more clarity on the next moves by central banks, and clues on the schedule and pace of potential rate cuts this year.
As the biggest market driver for a batch of assets, including equities, today's data is highly likely to significantly shape market sentiment and risk appetite in both the short and medium term.
Today's ideal scenario for bull traders would be slower inflation in the Eurozone, combined with US data coming as expected or slightly worse.
Indeed, a US employment sector showing more resilience than expected could keep the Fed comfortable with its "higher-for-longer" rate stance, which would undermine hopes of a rate cut as soon as Q1 2024.
The STOXX-50 still trades above its immediate support at 4,430.0 points, while bearish pressure remains high despite little moves on the market so far.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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