FOREX
The US dollar made advances in relation to other major currencies during early Thursday trading. The greenback gains came after Jerome Powell adopted a hawkish stance while speaking at a conference in Europe. The chairman of the Fed voiced concerns over persistently high inflation, alluding to two more rate hikes in 2023 and admitting that the first increase could be delivered at next month’s meeting. Against this background, few currency traders seem willing to bet against the dollar, with the Japanese yen emerging as the weakest link amid major currencies. The Bank of Japan is alone amongst its peers, adopting a dovish stance, with Governor Ueda declaring that the target of 2% inflation is to be pursued through sustainable ways, discarding any monetary policy tightening and driving the currency to the lowest level against the dollar since last November.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
European shares fluctuated on Thursday, highlighting today's uncertain market sentiment ahead of major macro data.
Risk appetite has slowed down in the second half of the week after hawkish hints from central bankers have dented positive expectations for equity traders.
Officials from the Fed, the BoE, the ECB and others have confirmed that the monetary tightening campaign and fight against inflation is far from over, killing hopes of a potential dovish pivot.
In addition to the mechanical effect higher borrowing costs and FX valuations may have on corporate results in the long run, investors are becoming increasingly afraid of the consequences this aggressive tightening cycle may have towards economies in general. Many traders struggle to assess when these higher rates will make their way into the several economic layers, fearing a more significant recession than previously anticipated. With uncertainty on the rise, investors may prefer to wait for further market catalysts before bringing more directionality to equity markets.
Some may come today with key data, such as the German CPI reports, GDP figures, and Pending Home Sales from the US, due later in the afternoon.
The STOXX-50 continues to trade sideways above its 4,345.0pts support, as gains in consumer cyclicals and financial shares are offset by losses from utility and real estate shares.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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