The dollar is gaining ground to other major currencies during early Thursday trading, once again assuming its safe haven role as the positivity of the last few days fizzles away. For most of the week market sentiment had been leaning towards a greater appetite for risk, as countries across Europe and the Americas started to reopen their economies. However, a degree of pessimism has returned to the markets, with investors taking stock of the gloomy picture painted by Fed officials who warned of tough times ahead for the economy.
Ricardo Evangelista – Senior Analyst, ActivTrades
The oil price continues to soar as despite the huge degree of uncertainty surrounding the future of the global economy, with forecasts of a strong decline of GDP in the majority of countries, investors are betting on oil demand bouncing back relatively quickly, particularly from Asia. Furthermore, the recent rally is also being driven by expectations that a decline in production could see a temporary switch in the market balance from a huge oversupply to a possible deficit.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Shares opened lower in Europe, extending overnight losses for Asian benchmarks following yesterday’s pessimistic outlook in the minutes of the FOMC’s meeting. The uncertain tone continues to weigh on global market sentiment as investors, still digesting the mixed news about a vaccine, are cautiously assessing virus data as lockdown measures are eased around the world.
Moreover, the deteriorating relationship between the US and China took another turn yesterday after President Trump renewed criticism of China’s leadership via a series of tweets. This poses a serious problem to investors as these rising tensions combined with the virus crisis may put the recent Washington-Beijing Phase One deal at risk, making stock markets even harder to predict. Investors will keep their focus on data today with several significant releases from both the US and the UK.
Most European markets are trading slightly lower today, with the Stoxx-50 Index still flirting with 2,900pts. The price has consolidated inside a 70 points-wide trading range, between both moving averages (144 and 233) while the Stochastic indicator is showing a bearish divergence which points to slowing down of the trend in the very short-term. If there is a breakout below 2,875pts, the next targets would be 2,785pts and 2,700pts.