FOREX
As the European session gets underway, the US dollar is trading flat against a basket of other major currencies, except for the yen. The Japanese currency has gained against the greenback and appears to have turned a corner after the steep decline that forced authorities in Tokyo to use foreign currency reserves to buy yen in the FX market to halt the depreciation. The base case for most trading desks is that the Federal Reserve will start cutting rates soon as US inflation approaches ideal levels and activity shows signs of slowing down in the world’s largest economy. Meanwhile, the Bank of Japan is expected to become more assertive in the face of higher inflation, a scenario that feeds expectations of a rate hike and could lead to further gains for the yen.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equity markets climbed higher in Europe at the beginning of a new trading week, paring some of the recent losses ahead of another batch of major macro and corporate developments. Markets reacted positively after Joe Biden dropped out of the 2024 presidential race over the weekend. An event like this would normally cause uncertainty and market volatility for traders. However, the news has been well-received by investors.
Recent polls indicating that Republican candidate Donald Trump is leading suggested that Biden may not be the best choice for the upcoming election among the Democrats. Treasuries rose while the US dollar pulled back, which mechanically eased the pressure on stocks on Monday. The impact has, however, remained limited as investors remain focused on corporate results and monetary policies. Indeed, this week will be full of crucial developments with earning reports from Alphabet, Tesla, LVMH and other major European companies.
Meanwhile, traders will also keep an eye on economic data to be published later this week, with the US GDP and PCE Price Index as the main event. The STOXX-50 trades below 4,900pts following a rebound over the 4,925pts zone, led mainly by tech and healthcare shares.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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