FX
The US dollar is rising against the other major currencies as the European session gets underway. The greenback is experiencing greater demand as a drop in global risk appetite increases flows into perceived safe-havens. A lack of agreement between Democrats and Republicans on raising the debt ceiling is increasing anxiety levels amongst investors, who are left fearing the unknown consequences of a US government default. It is still widely assumed that there will be a last-minute agreement, but the closer the deadline of early June gets, the higher the volatility we should expect in financial markets. Against this background, the dollar is likely to remain supported in the runup to the deadline, in a dynamic supported by the words of senior Fed officials, who recently highlighted the stickiness of inflation and defended further interest rate hikes this year.
Ricardo Evangelista, Senior Analyst, ActivTrades
EUROPEAN STOCKS
Equities opened lower in Europe on Tuesday, extending losses registered overnight in Asia, as fear and uncertainty grow in investors’ minds. Bearish sentiment is prevailing on stocks with Treasury yields taking off as risk appetite continues to plummet amid the lack of a US debt ceiling deal, despite another full day of discussions yesterday.
Fear is growing too as the deadline for an extension of the debt ceiling is fast approaching, and the prospect of a payment default from the US becomes more and more real, which is further denting market sentiment.
Elsewhere, investors will be keeping an eye on US data today with Building Permits, PMI Services and New Home Sales all expected to show declines compared to last month.
All EU benchmarks are currently in red territory today, with all sectors down with the worst performances coming from Consumer Cyclicals, Utilities and Healthcare.
The STOXX-50 Index is now trading below its first support under 4,375pts, with 4,352pts now in sight.
Pierre Veyret, Head of French Markets & Global Asset Technical Analyst, ActivTrades
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