FOREX
The US dollar lost ground to its peers during early Thursday trading, carrying the momentum initiated during the previous session after Jerome Powell’s comments at the end of the Federal Reserve’s November meeting. The chairman of the Fed spoke after the decision to keep rates on hold was announced, and his stance was seen by many as less hawkish than on previous occasions. Powell acknowledged that monetary conditions have tightened, alluding to the sharp selloff in treasuries, and traders reacted by swiftly pricing in the reduced chances of another rate hike during the current cycle. However, the downside for the greenback was limited; rates may have peaked, but they are likely to remain at the current high levels until mid-2024.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stocks climbed significantly in Europe on Thursday, alongside US futures on the S&P 500, as the Fed boosted risk appetite.
All EU benchmarks jumped shortly after the opening bell, setting the stage for a fourth consecutive day of gains following the rebound below 4,000 pts on the pan-European STOXX-50 index.
The market is being driven up by all sectors, with real estate and consumer non-cyclical shares as the top movers, amid widely spread increasing risk appetite.
Fed chairman Jerome Powell boosted market sentiment yesterday evening after providing investors with a few dovish hints. Investors were especially relieved to hear that conditions may have tightened enough, as indicated by the recent surge in bond yields. Although Powell didn’t rule out another rate hike, most investors are now anticipating a peak in monetary tightening, opening the door to a less aggressive stance from the Fed.
If proven true during the next FOMC meetings, this would be a major shift in one of the most important market drivers for stocks and currencies, supporting appetite for riskier assets.
Meanwhile, investors have also understood that the ECB and the Fed remain data-dependent and will proceed on a meeting-by-meeting basis in adjusting their policies. All eyes will likely be on the upcoming slew of major data, such as today’s EU PMI, US factory orders and jobless claims, alongside the decision on rates from the BoE and ahead of tomorrow’s US NFP report.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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