Global optimism revives risk-on sentiment
|The renewed optimism over global economic growth has rekindled investors’ risk sentiment, resulting in global equities lurching to all-time highs this week. Asian markets were firmly bullish during trading on Wednesday with the risk-on trading mood encouraging participants to propel European markets to uncharted territories. Wall Street may be set to benefit further from the heightened speculations of tax cuts and deregulations boosting US economic growth. Although the current stock market rally is somewhat justifiable, the rising political risks across the globe and ongoing uncertainty could serve as ominous warnings questioning the sustainability of the rally. Stock markets could come under renewed selling pressure if anxiety from the developments in Europe and disappointments from Trump’s pending economic policies sparks a fresh wave of risk aversion.
Sterling pressured by bears
Sterling found itself exposed to steep losses on Wednesday following the mixed economic data from the UK which revived some Brexit anxieties. Although Britain’s economic growth accelerated faster than previously assumed in the final quarter of 2016 at 0.7%, the noticeable decline in business investment in the same quarter has already triggered concerns of how the rising uncertainty will impact investment this year. Sterling remains heavily influenced by the Brexit developments with further weakness expected as uncertainty haunts investor attraction towards the currency. The Sterling/Dollar remains heavily pressured on the daily charts and a breakdown below 1.2400 could encourage a further decline towards 1.2300.
FOMC meeting minutes in focus
The improving sentiment towards the U.S economy, prospects of higher US rates and the relentless “Trump effect” have made the Dollar king again. Today’s main focus will be the FOMC meeting minutes this evening which has the ability to fuel the current bull rally or potentially limit gains. If the FOMC minutes are in harmony with the recent hawkish comments from Fed official, then the Greenback may be installed with further inspiration to trade towards 102.00.
Commodity spotlight – Gold
Gold was sold-off incessantly on Tuesday with prices tumbling towards $1226 as the speculations of a US interest rate hike in March and renewed appetite for riskier assets dented attraction towards the metal. Despite the sharp decline, the yellow metal has staged a sharp rebound on the back of rising political risk and ongoing uncertainty across the board. The visible fact that Gold continues to display resilience despite Dollars resurgence continues to highlight how risk aversion in the background continues to keep the metal buoyed. From a technical standpoint, Gold remains bullish on the daily charts and a breakout above $1240 could encourage a further incline higher towards $1250.
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