The US Dollar is back on the front foot during early Friday trading, with the index that measures its performance versus a basket of other major currencies, on track to end the week in the green for the fifth consecutive time. Having lost some steam after the Fed’s largest rate hike in 20 years, which in large measure occurred because the markets interpreted the tone of the announcement – especially the dismissal of the possibility of future rate increases in the order of 75 basis points- as a hint of possible premature shift from the current hawkish stance. However, such sentiment didn’t last, as trying to read the tea leaves of Jerome Powell’s words is pointless at this stage, as the US central bank’s hawkishness clearly leaves it well ahead of its peers.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets extended yesterday’s losses on Friday, alongside US Futures, as risk aversion dominates everywhere at the end of the week. Markets are set to register their biggest weekly drop in two months, with today’s decline led by Health Care and Tech shares, as the bullish enthusiasm brought by higher rates from the Federal Reserve on Wednesday has proven to be short-lived. Indeed, while seeing central banks taking steps to fight inflation can be considered as positive, most investors also wonder what the impact monetary tightening will have on overheating/declining economies, and this has sparked some serious concerns over the mid to long-term basis for stocks. Moreover, investors continue to assess the situation in China as lockdowns further damage the economy as well as impacting supply chains and demand for certain products, especially in the commodity sector. Today’s focus is likely to be locked on the highly awaited US Non-Farm Payroll figures, where investors will get more clues about the strength of the US economy as well as the impact of higher wages on inflation.
The STOXX-50 index is trading below its 3,700.0/3,685.0pts major support level, now seen as resistance to the market. The market has quickly reached its next support zone at 3,625.0pts, where a break-out could swiftly lead prices towards 3,520.0pts.
Pierre Veyret– Technical analyst, ActivTrades
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