FOREX
The US dollar is on the back foot in relation to other major currencies during early Tuesday trading. Investors are focusing on today’s release of US inflation data, with the yearly number expected to come up at 4.1%, the lowest level since early 2021 and a substantial reduction from the previous reading which touched 4.9%. No one will be more attentive to today’s inflation numbers than the members of the Fed’s FOMC, who will be starting a two-day meeting to decide on the country’s monetary policy. After ten consecutive rate hikes, a pause in June is all but certain, however, the tone and substance of the announcement will carry real weight from the perspective of the markets. A low inflation reading would be likely to have some impact on the discussions and could tilt the scales towards a less interventive stance, in which case the guidance could be more dovish than some have been expecting. Against this background, it is fair to say that the short-to-medium-term direction for the dollar hinges, to some extent, on today’s inflation numbers and tomorrow’s Fed monetary policy statement.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stocks continue to trade higher on Tuesday in both Europe and Asia, while US futures contracts on the S&P500 also point to a firmer open, amid increasing appetite for risk boosted by central banks. The bullish sentiment towards equity markets came after initial moves sparked by dovish bets regarding the outcome of the next FOMC meeting and have been strengthened by a significant dovish pivot from the PBOC overnight.
The fact China announced cutting its short-term rate hike policy to switch to a batch of support measures towards its domestic economy has been strongly welcomed by investors around the world.
However, volatility may persist as all eyes turn to today's crucial US inflation data. The market's dovish expectations for the Fed's decision later this week are closely tied to declining inflation, and any CPI figures that deviate from expectations could lead to significant repricing and impact sentiment towards riskier assets.
The STOXX-50 climbed close to 4,355.0pts before pulling back to 4,340.0pts in early trading. The 4,335.0pts can be seen as the first short-term support level to the market.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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