The US dollar is trading almost flat in relation to other major currencies, remaining close to the one-month lows touched earlier in the week. Yesterday’s publication of the last FOMC minutes reinforced the idea that despite the ongoing inflationary pressures, policy makers at the Federal Reserve will not increase the pace of tightening beyond what is already priced-in by the markets. With two 50 bp hikes, in June and July, already baked into the value of the greenback, the Fed is giving signs of caution as it still hopes to deliver the desired soft landing; i.e. control inflation without causing a recession. Against this backdrop, and with other central banks, such as the ECB, tilting towards greater hawkishness, there may be scope for further dollar losses.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets followed the global neutral trend on Thursday following a mixed opening, as traders digest the latest macro developments. Investors welcomed the minutes of the last FOMC meeting yesterday, especially after it indicated the Fed could be less aggressive than initially expected, by changing the pace of its current hawkish approach if improvements were to be witnessed regarding inflation. While this provided investors with a temporary relief, today’s mixed price action on stocks mostly shows that major bearish leverages linger. The war in Eastern Europe and concerns about the Chinese economy still add stress to market sentiment, while investors will want to see evidence of improvements regarding the pressure coming from rising prices, rather than just rumour. The next CPI prints are likely to be seen as crucial by many, as an actual ticking down of inflation could spark a new trading enthusiasm led by a growing risk appetite – especially at a time where many shares can be bought at a discounted price. Health Care and Energy stocks are leading European benchmarks higher today, with the best performance being registered by Frankfurt as the DAX-40 index trades above the 14,000.0pts mark.
Volatility spikes may still happen today as traders patiently wait for the US GDP and Initial Jobless Claims release due in the afternoon.
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.