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Daily market commentary: A string of negative economic data released reveals that the Fed’s tightening drive is starting to open some cracks in the American economy
The US dollar is losing ground to other major currencies during early Wednesday trading. A string of negative economic data released since the beginning of the week, including PMI numbers, house prices and consumer confidence, showed that the Fed’s tightening drive is starting to open some cracks in the American economy. The Federal Reserve has been hiking rates aggressively, in an attempt to bring inflation under control, and the country’s economy is starting to suffer as a result. Against this background, the markets priced-in a downgraded outlook for the US economy, causing a drop in the value of the greenback. However, it is unlikely that this dynamic will last for long. The US central bank is unlikely to deviate from its current hawkish stance. Several senior Fed officials have in the past stated that hurting growth and employment is a price worth paying in order to control the rise in consumer prices. Therefore, until inflation retreats to lower levels, the dollar is likely to remain the outstanding performer among leading currencies.
Ricardo Evangelista – Senior Analyst, ActivTrades
European Shares
European shares held their gains at the start of another busy day, following the bullish sentiment registered overnight in Asia, as short-term risk appetite remains high almost everywhere.
Macro developments are taking a break this week with the lack of key data release (apart from the ECB meeting tomorrow), and investors rely on the only piece of information they have in order to adjust their portfolio’s exposure – corporate profits.
Almost a quarter of companies have already reported their Q3 results, with most of them beating estimates, which has provided a fresh short-term boost to risk appetite despite lingering uncertainties on the macro front.
Even if market sentiment remains globally frail, it seems most investors want to believe in an improving mid- to long-term outlook for economies, betting on the slowdown of monetary tightening as well as cheering on company results showing resilience to this blurry economic environment. That said, this type of trading behaviour could become a real threat to riskier assets if the rumours or hopes investors are currently buying, were to be proven untrue in the near future. With that in mind, we expect market volatility to climb higher and higher as uncertainty lingers as we get closer to key macro events such as the next CPI prints and the next FOMC meeting.
Traders will keep their eyes on corporate profits today, patiently waiting for an important slew of reports from major French companies such as TotalEnergies, STMicroelectronics, Schneider Electric, Saint-Gobain, CapGemini and Danone while results from Meta, Ford Motor Co and Boeing loom in the US.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
