FOREX
The US dollar is trading flat, close to the more-than-one-week high touched yesterday. The greenback was in demand when traders returned to their desks on Tuesday, after the new year’s break, as risk appetite took a sudden tumble, with tech stocks bearing the brunt of the losses. December had been marked by the euphoria that followed the Fed’s sudden pivot to a dovish stance, which drove a rally in stocks and bonds and weighed heavily on the dollar. Yesterday’s sudden change in mood was sobering and left many wondering if it would last. With Friday’s release of nonfarm payrolls looming, the US employment data could once again tilt the scales towards greater risk appetite should the numbers reveal a further slowdown in the US labour market, which would leave the Fed with little alternative than to start cutting rates in March.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equity markets opened mixed in Europe on Wednesday, following the global trend, as investors brace for new macro data.
Uncertainty prevailed on European shares after the first trading session of the year yesterday provided an unclear picture of investor appetite for riskier assets, and drove most benchmarks back to support levels.
Today's first exchanges extended that market sentiment, with gains from healthcare, financial and consumer non-cyclical sectors offset by losses from basic material, cyclical values, energy and industrial shares.
As previously mentioned, the rally pause observed since the second part of December will likely continue until investors witness new bullish catalysts from positive macro developments. With that in mind, this week's data should significantly shape the short-term outlook for stocks. Traders are now bracing for a batch of key data from the US, due later this afternoon, with the JOLTS, ISM, and Fed minutes. Meanwhile, volatility may rise, bringing sharp price action, but we don't expect markets to take any clear direction until this afternoon's data comes out.
The STOXX-50 index is slowly dancing around the lower bound of its trading range at 4,493.0pts, while a rising EUR currency combined with lower bond markets hasn't delivered a positive setup for stocks so far.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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