FOREX
The US dollar index hedged down during early Monday trading but remains close to Friday’s closing level. After the mid-week losses that followed the Federal Reserve meeting and markedly dovish stance from its chairman, Jerome Powell, the greenback claimed some ground back on Friday after another senior Fed figure pushed back on expectations of an imminent pivot. After Powell’s dovish intervention last Wednesday, the markets moved quickly to price-in expectations of at least 75 basis points of rate cuts in 2024, triggering a rally in the bond market that drove down yields and weighed on the US dollar, which fell almost 2%. These losses were partially reversed on Friday after New York Fed President John Williams said the central bank wasn’t yet considering rate cuts. However, as the market opened this Monday, the dollar is again under pressure. It appears that the cat is now out of the bag for the markets, and it will take some effort to push back on expectations and avoid further greenback weakness.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Markets opened mixed at the beginning of a new week in Europe, extending the uncertain sentiment seen overnight in Asia, as monetary dovish hopes keep getting tempered.
Investors remained hesitant on Monday after their risk appetite cooled down following last Friday’s narrative from central bank officials who wanted to mitigate the strong dovish hopes already priced into the markets.
However, while some may think markets may have gone too high too quickly, investors will probably need more substantial evidence (Eurozone inflation on Thursday) than just plain semantics that they were wrong with their dovish anticipations before bringing significant adjustments to their risk exposure.
With that in mind, it will be interesting to see how benchmarks behave over their key support levels.
Since today’s trading session began, we have already seen the STOXX-50 index reacting positively over the 4,520.0pts zone, the bottom line of its consolidation pattern.
However, a break-out of this area could quickly lead the market into correction territory, towards 4,460.0pts and even deeper, while a bounce back over 4,520.0pts would keep the current bullish trend alive.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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