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Daily market commentary: Price gains for oil are likely to be capped by anxiety amongst investors due to the Covid Delta strain
The US dollar recorded modest gains during the early part of Tuesday’s session, as the markets hold steady ahead of the publication of US inflation numbers later today. Investors will pay close attention to the release of the data, which is likely to offer more clarity on the timing of the tapering and rate hikes by the Federal Reserve. The consensus among analysts points at a rise of 4.9% in June, compared with the same period of 2020; a scenario already baked into the value of the greenback. It would take a considerably higher figure, at least half a point, to surprise the markets. On the other hand, a number disappointing to the downside could make the Fed think twice about the recent shift to a more hawkish stance, and be likely to weigh on the dollar.
Oil traded higher during early Tuesday, with most of Monday’s losses already cancelled. The price of the barrel remains conditioned by tight supply, with the markets expecting a continuation of the declines in US crude stockpiles, which have been on a downward trend since February. However, further price gains for oil are likely to be capped by some anxiety amongst investors over a potential drop in demand due to the spreading of the Covid Delta strain.
Stocks opened mixed in Europe on Tuesday, with gains in Helsinki and Amsterdam offsetting losses in Milan and Madrid, as investors brace for a busy day on the macro front. Inflation data and corporate results are the main focus for investors, with today’s US CPI report and a slew of earnings reports from banking giants, while Jerome Powell’s testimony looms later this week. The market consolidation has continued so far, as investors may already be pricing inflationary pressures from an expected solid earnings season. Paradoxically, with this context of recovery, the accelerating Delta variant spread combined with a slow-down in vaccinations could delay any hawkish shift from central banks, sustaining market sentiment further and allowing the stock rally to edge higher. The best European performance comes from Paris as the CAC-40 index has successfully registered a bullish breakout of its bearish flag, above the 38.2% zone and now trades around 6,550 pts with 6,585 pts in sight.
Pierre Veyret– Technical analyst, ActivTrades
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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.
