Markets mixed as investors eye bigger events

Dollar flat in data-void session
Chinese stocks, AUD lead
Bitcoin tests $25K resistance

The start of the new week has been uninspiring to say the least, although Chinese markets put in a great performance overnight and cryptocurrencies have continued their recent, good, form with Bitcoin nearing $25K. There’s also been a bit of follow-through in risk-taking in FX markets, with the Aussie leading the gains, after the US dollar retreated to close Friday’s session lower. Despite Friday’s down close, though, the Dollar Index still managed to post gains for the third consecutive week. Taking everything into consideration, investor sentiment remains mildly supported ahead of the week’s key events, but rising expectations of more rate hikes and tighter monetary policy for longer is something that is limiting the upside for risk assets in general. This is also something that might provide renewed support for the dollar after Friday’s selling.

On Friday, foreign currencies, gold, copper and several European indices all recovered from earlier weakness to bounce back into the close, and that momentum has carried over into Monday’s session where Chinese equities rallied strongly overnight, leading to some positive follow-through into the European open. However, it is a largely data-void session, with the US also out in observance of Presidents’ Day.

Investors will be looking forward to a busier session on Tuesday when the latest PMIs are published to provide the markets with a snapshot of the economic activity around the world. Later in the week, we will have the RBNZ rate decision, FOMC minutes, the second estimate of US GDP and the Fed’s favourite measure of inflation – the Core PCE Price Index.

Speaking of the Fed, policymakers at the FOMC have again become quite vocal about more rate hikes and high rates for longer in recent weeks, owing to a tight labour market and stronger-than-expected inflation data, with CPI and PPI both surprising last week. Fed's Mester and Bullard were characteristically hawkish on Thursday and floated the idea of more aggressive 50bp rate hikes, although we don’t necessarily think that will be required. More hawkish Fed comments continued on Friday, this time from Barkin and Bowman, although the fact they didn’t say anything dissimilar to the other Fed officials, the dollar bulls decided to take profit ahead of the long weekend.

Whether or not the dollar selling will hold remains to be seen. So far, we haven’t seen anything too significant. All eyes will be on those macro releases as we head deeper into the week.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.