FOREX
The US dollar edged lower during early Thursday trading, carrying the momentum initiated during the previous session after the Federal Reserve announced what many expect to be the last rate hike of the current cycle. The Chairman of the US central bank admitted the possibility of another increase in borrowing costs later in the year. However, he also mentioned lower inflation and an improved outlook for the country’s economy, which now looks set to achieve the desired soft landing. The words of Jerome Powell struck a chord with investors, with optimism taking over the markets in a dynamic that penalises the haven dollar. Whether the Fed has reached the end of the current tightening cycle or not will ultimately depend on the inflation and employment data to be published later in the year, but right now, it certainly looks like this may be it.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stock markets climbed significantly higher in Europe on Thursday as dovish bets boosted risk appetite.
Market sentiment strengthened towards all EU benchmarks after the Fed delivered the expected 25 basis-point rate hike yesterday evening. Jerome Powell also added that further increases in borrowing costs would be “data dependent”.
The market has perceived this as positive news so far, with more and more investors betting that the tightening cycle has peaked.
However, EU stock investors aren’t out of the wood yet, as the next ECB rates decision looms later this afternoon.
Most traders expect a lingering hawkish stance from ECB president Christine Lagarde, alongside the announcement of another 25bp rate hike. But again, investors will assess the wording used during the press conference to get a clearer picture of the path of monetary tightening in the Eurozone.
That said, unless the ECB adopts a more hawkish stance than estimated, we don’t expect any sharp bearish price reaction on equities this afternoon.
Yesterday’s decision from the Fed still acts as one of the most important bullish catalysts, and the lack of any negative surprise this afternoon from the ECB should contribute to improving market sentiment towards stocks.
Technically speaking, traders are already buying in.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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