Wed, Dec 07, 2022 @ 01:05 GMT
HomeContributorsFundamental AnalysisEuropean Markets In Recovery Mode | Fed May Cut Interest Rate

European Markets In Recovery Mode | Fed May Cut Interest Rate

European markets and US futures are trading higher, it seems like bulls are in mood for some revenge trade. Traders are picking up the momentum from Asia. The recent dovish comment by the Fed has also helped the sentiment among investors.

During his visit to the UK, Donald Trump sent several different signals that the US is ready to make trade deals with the country as the UK prepares its self to leave the EU. His comments will only help to divide the lawmakers more as their vision will be more clouded. He has clearly backed up those officials who favour nationalism and back a no deal Brexit. He is expected to travel to France today and the focus will shift to European politics now.

Throughout this year, there has been one clear dominant trend for the dollar index, and this trend has been skewed to the upside. Remember, this is despite the fact that the Federal Reserve over in the US changed its hawkish monetary policy stance. However, traders always had their doubt and due to this reason we have seen the rally in the dollar index during this year.

Fed Likely To Make A Move

Last night, the Fed once again sent a very clear message for the markets: the committee is on the verge of cutting the interest rate. Over in the US, Jerome Powell, the Fed chairman said in his statement that the Fed will “act as appropriate to sustain the expansion”. These comments were enough to boost confidence among investors and this is the chief reason that we experienced a rally in the stocks over in the US.

The Dow Jones rallied over 500 points last night. The index is down more than 5 percent during the past month, the NASDAQ index lost the most of its value among major bench mark indices, down nearly 8 percent.

Australian GDP Data

Overnight, we also had the Australian GDP data, the headline number came in a little soft: missed the forecast. Gross domestic product reading came in at 0.4 percent while the forecast was 0.5 percent and this confirmed that the Reserve Bank of Australia wasn’t wrong in its monetary policy decision. Recently, the bank has cut the cash rate to a record low. The fact is that under the current circumstances, it is highly likely that the bank will have to cut the growth forecast once again.

Trade War

As for the trade war, tensions are still very prominent however there is some softness in stance. The Chinese commerce minister indicated in his latest comments that the differences between Beijing and Washington can be resolved through constructive dialogues. However, the US needs to understand that the word called “mutual respect”. For traders, this is more a signal that country is perhaps ready and open for discussion and this has also helped the sentiment.

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