FOREX
The US dollar was trading flat as the European trading session got underway. Investors are sitting tight for the moment, awaiting the release of US inflation data later in the day. Last week, the Federal Reserve hiked rates for the tenth consecutive time, a move that was seen by many as the last chapter of the current tightening cycle. Against this background, today’s release of inflation data could provide even more substance to investors' belief that the US central bank will pause and perhaps even open the door for a rate cut before the end of the year. Recent data releases have shown a resilience in the US economy which surprised some, reducing the chances of a rate cut in 2023 and highlighting the importance of today’s inflation numbers. However, a clear slowdown in core inflation would create some scope for a rate cut in 2023; so, a CPI number surprising to the downside is likely to trigger dollar weakness as investors would quickly price-in the shift in expectations.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stocks fluctuated in Europe on Wednesday, with market sentiment taking a break as investors await major macro developments.
Sideways trading prevailed in the first exchanges of the new trading session, with gains from energy and financial shares offset by poor performances in the consumer non-cyclicals and healthcare sector. Investors are still digesting the lingering hawkish stance from the ECB and ongoing crucial discussions around the US debt ceiling issue, while also waiting for key US inflation data and crude oil Inventories due later in the afternoon.
No change is expected in today’s US inflation report compared to last month’s data, which leaves investors in an awkward position, with many scenarios on the table. A decrease in inflation numbers would ease pressure off the Fed and its tightening stance, and lift market sentiment towards riskier assets. On the other hand, an acceleration of price pressure could suggest the Fed hasn’t gone far enough with its rate hike cycle, denting appetite for risk from investors who would likely look for safety if that happens.
The Stoxx-50 is trading between 4,333.0pts and 4,303.0pts, where a potential downside risk could lead the market towards 4,282.0pts and 4,250.0pts by extension, on the short-term basis.
Pierre Veyret– Technical analyst, ActivTrades
Source: ActivTrader
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