GOLD
Gold prices edged down in early Wednesday trading, reflecting uncertainty over the Federal Reserve’s monetary policy. Traders are now focused on the main economic calendar event of the week: the release of US personal consumption expenditure figures. PCE is the Fed’s favourite inflation gauge, and this week’s release is expected to clarify the likelihood of a rate cut in September. Expectations continue to shift regarding the Fed’s rate decisions, with the latest twist arriving on Tuesday when a senior official mentioned that some FOMC members still consider the possibility of the next move being a rate hike. This led to a rise in Treasury yields and the US dollar. Against this backdrop, the price of the precious metal is likely to remain rangebound until the release of PCE data on Friday.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
European markets followed the global risk-off sentiment on Wednesday, sliding lower as investors' hopes of rate cuts in the EU and the US were undermined. Fed official Kashkari's latest comment about a lingering restrictive stance from the FOMC, stating that additional rate hikes haven't been completely ruled out, has significantly dented investor's risk appetite.
Meanwhile, in Europe, investors' fear of lingering inflationary pressures ahead of this week's data also fueled the "higher for longer" stance regarding the ECB's borrowing rates. The prospect of a delayed start of the next monetary easing cycle is reshaping market sentiment, leading currencies higher while pressuring bond and stock markets. It seems investors are already bracing for the worst ahead of EU CPI and US PCE data due later this week.
However, with this afternoon's German CPI data, traders will likely get some clues about where inflation is going on the old continent. We expect market volatility to grow higher as we get into this busy second part of the week on the economic front. Most sectors are in the red, with consumer cyclicals and basic material shares registering the worst performances so far. The STOXX-50 index is heading towards its major short-term support, a level already well defended by bull traders during the last few trading sessions.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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