Daily market commentary: The euro posts gains against the dollar, following surprise announcement of an ECB meeting

Gold

Gold prices hedged up during early Wednesday trading but remained close to the multi-week lows touched during the previous session. The precious metal price has recently been closely linked to that of the US dollar, with which it has a strong inverted correlation, as well as to the behaviour of bond yields; against this background, today’s gains can be explained by the easing in Treasury yields, and a dollar that lost some ground in relation to its peers, as the markets pause for breath ahead of the Fed’s rate decision later today. With a 75bp rate hike already baked into the value of the greenback, investors will now sit back and wait for the announcement from the US Central bank; however, it is very likely that gold prices will remain under pressure, as the non-yielding metal loses appeal due to the tightening of monetary policies by central banks as they move to bring inflation under control.

Ricardo Evangelista – Senior Analyst, ActivTrades

European Shares

European stocks climbed on Wednesday, alongside treasuries, after the ECB surprisingly reassured investors. The announcement of an unplanned meeting from the European Central Bank, to tackle extremely volatile market conditions, came as a wind of relief to many investors. This surprising move from the ECB comes in contrast of what is currently happening in the US, where the switch from dovish to hawkish monetary policies from the FED has seriously dented risk appetite and sent bond markets spiking in an uncontrollable fashion. Investors are then welcoming the fact the ECB is willing to keep stability in credit markets, ahead of withdrawing stimulus measures in the Euro area.

Of course, traders are likely to wait and see what is going to be officially announced (measures and roadmap) by the ECB before bringing more directionality in the stock markets, however, the fact market drivers may already be changing is perceived as a major development for EU stock investors. All EU benchmarks trade higher today, with the best performance being brought by Madrid and Milan, where the FTSE MIB is heading towards its first short-term resistance at 22,500.0pts.

Pierre Veyret– Technical analyst, ActivTrades

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