FOREX
The US dollar is trading almost flat as the European session gets underway. Investors are in wait-and-see mode ahead of the release of American inflation data for October later today. In terms of the currency markets, this event will be critical in the economic calendar and will likely impact the direction of dollar trading in the coming weeks. Senior Fed officials have been working hard at every public speaking opportunity to halt the market's growing perception that the current hiking cycle has finished and that a cut may come sooner than expected. The tight monetary conditions of the last few months, with yields touching historic highs, kept the greenback supported and helped in the fight against inflation, so it's no surprise that Jerome Powell and his peers want to talk down any excessive optimism. However, today's inflation numbers will be key in shaping market expectations. A headline reading below the expected 3.3% could overrule the Fed's rhetoric and break the impasse for dollar traders, shifting dollar risk to the downside.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stock benchmarks registered modest gains on Tuesday, extending the sentiment seen in Asia overnight, with investors bracing for today’s crucial US inflation data.
As previously said in our last report, market sentiment towards risky assets has lost a bit of its direction over the past few days after Federal Reserve officials expressed mixed hints about the future of monetary policies. With traders and investors worldwide not knowing what to believe, they will likely turn their focus back to data, making today’s inflation print crucial.
Simply put, if the cooling of rising price pressure is confirmed with today’s data, the prospect of a less aggressive stance from the Fed could become a reality, likely boosting appetite for stocks.
On the other hand, CPI data showing inflation remains stubbornly high would negatively impact price action towards equities, opening the way for a deep correction on most benchmarks following the rally that started at the end of October.
The first scenario is currently being priced in as the STOXX-50 index challenges a major daily resistance at 4,240.0pts, driven higher by basic materials, healthcare and consumer cyclicals.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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