FOREX
The US dollar had its worst session in a year, with the index that measures its performance against a basket of other major currencies dropping more than 1.5% on Tuesday. The sudden greenback weakness was triggered by the release of US inflation data for October, which was softer than expected and resulted in an increase in bets that the Fed’s hiking cycle is now truly finished. Expectations of an earlier rate cut also increased, with about 50% of market participants believing it will happen before June. The impact on the markets was immediate. Investors anticipated the perspective of lower rates, buying treasuries and causing a drop in yields, in a dynamic that compounded the dollar’s weakness. Against this background, the release of US PPI and retail sales numbers later today will be at the centre of investors’ attention. More disappointing data may induce further dollar softness.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stocks rallied in Europe on Wednesday, with a fresh boost to risk appetite as dovish bets resurge.
Market sentiment towards risky assets strengthened significantly after investors witnessed softer-than-expected inflation readings in the US yesterday and in the UK this morning.
These reports relieved stock investors, who now have more clarity on the likely path of monetary tightening from the Fed and the BoE.
With the prospect of a peak in the rate hike cycle and even growing bets of rate cuts in the first half of 2024, stock traders have been given the green light to increase their exposure to equity markets.
Cooling inflation is the signal many have been waiting for, and while we must wait for the December meetings to confirm the future of monetary policies, the news should provide strong support for stock prices.
However, EU investors aren’t out of the wood yet as the EU CPI report still looms on Friday.
This bullish shift can be seen technically, as the STOXX-50 index cleared two major daily resistance levels in a few hours and is now trading well above the 4,300.0pts level. The next big resistance is around 4,385.0pts, while intermediary zones are located close to 4,330.0pts and 4,350.0pts.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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