FOREX
The US dollar touched a fresh five-week high during early Tuesday trading, with investors, unsettled by the military escalation in the Red Sea, seeking the safety of the greenback. The attack on a US cargo ship raised questions over American ability to ensure the safe passage of commercial transport ships via the Suez route while also raising the stakes in a simmering conflict that threatens to escalate and turn into an all-out war involving other regional players such as Iran. At the same time, the markets are also looking ahead to the release of US industrial production and retail sales, which come out tomorrow, as well as waiting for a public address later today by Christopher Waller, a senior Fed official, which could give clues on the Fed's plans for its monetary policy in 2024. Bets on a rate cut in March have been fizzling out as the US economy continues to show a resilience that gives the Federal Reserve headroom to keep rates high for longer, in a dynamic that, helped by global geopolitical instability, supports the dollar gains in relation to other major currencies.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equities continued to decline in Europe, following the global “risk-off” trend as investors weighed geopolitical tensions and monetary uncertainties.
Market sentiment continues to be weighed down after investors were disappointed to hear another hawkish ECB echo from the Davos summit, confirming fears that rate cuts may not be coming as soon as many expected.
With the latest data suggesting the battle against inflation is still far from over, the ECB is in no hurry to adopt a more dovish stance, putting the equity market under pressure.
The other bearish leverage comes from the geopolitical front amid lingering tensions in the Middle East brought by the latest batch of attacks in the Red Sea from the Houthis. Many investors now fear a broadening conflict, especially after the latest US-UK-led strikes in Yemen, that could potentially include nations such as Iran.
With that in mind, investors are likely to put their short-term focus towards corporate reports as the earning season continues to roll. Indeed, results showing resilience from the corporate sphere to the current uncertain and hawkish environment could prevent benchmarks from dipping lower in the short term.
Today’s volatility is likely to be brought by Q3 reports from Goldman Sachs and Morgan Stanley, while investors await a speech from Fed Governor Waller in Davos later today.
The STOXX-50 trades around its first resistance above 4,420.0pts, where a crucial break-out could open the door to a deeper correction.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.