FOREX
The yen touched a four-month high against the dollar in early Wednesday trading. The Japanese currency reached 150 per dollar for the first time in months after the Bank of Japan announced a raise in interest rates and the tapering of its asset-buying programme. The aim is to halve bond purchases over the next 18 months. Immediately after the announcement, there were gains, swiftly followed by a retracement as the measures had been somewhat expected. Nevertheless, the yen regained momentum at the start of European trading. The rate hike wasn’t a complete surprise but, being only the second interest rate increase in 17 years, it delivers a clear hawkish message from the central bank. On the other hand, the quantitative tightening announcement fell short of some expectations. Against this backdrop, the yen looks set to maintain some of this morning’s gains, but further upside may be capped by the disappointing tightening announcement.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equity markets climbed in Europe on Wednesday as dovish hopes boosted market sentiment ahead of the Fed’s monetary decision. The latest slew of reassuring economic data from the old continent, which saw positive GDP and lower inflation figures, has renewed risk appetite and induced investors to buy the dip in EU assets.
This led the STOXX-50 index to clear a significant short-term resistance level, as prices now challenge the 4,900pts level, with tech and industrial shares as the top performers. In addition to the improving economic conditions in the Eurozone, investors are now shifting their focus to the other side of the Atlantic, where a monetary decision from the Fed looms today.
While no Fed official has provided any significant hint regarding the FOMC’s next move, the latest round of economic data from the US has shown resiliency and lower price pressure, which support the hope of a dovish monetary move. However, with such a busy end to the week on both the macro and corporate fronts, we expect market volatility to remain high. Indeed, uncertainty lingers in most markets, and any surprises provided by the next development could lead to brutal portfolio adjustments from investors.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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