European markets spent most of yesterday edging cautiously higher, with the FTSE100 shrugging off the UK government’s decision to impose a 25% windfall tax on the oil and gas sector, while at the same time unveiling a fiscal stimulus package.

The decision to impose the controversial tax appears to have prompted a review of their investment plans, on the part of BP, who had previously committed £18bn of investment into the UK economy by the end of 2030. Who could possibly have foreseen that?

Putting the windfall tax to one side, yesterday’s gains started to accelerate during the late afternoon after US markets opened, with retail stocks leading the way higher, on both sides of the Atlantic.

US retail helped set the tone with strong gains from the likes of Dollar Tree and Dollar General who topped the gainers on the S&P500 after Dollar Tree lifted its full year outlook for revenues to just shy of $28bn, after enterprise same store sales rose by 4.4%.

With all the doom and gloom surrounding US retail over the past couple of weeks the numbers were a welcome tonic, with this week’s decent numbers from Macy’s and Nordstrom adding to the momentum, as US markets finished a strong session with decent gains.

As we look ahead to a mixed European open it’s been another choppy week, albeit with a positive bias, with the FTSE100 on track for its strongest week of gains since March, driven by a rebound in the retail sector, with the likes of Ocado, Kingfisher, Marks & Spencer performing strongly.

The battle to contain the inflation genie appears to have started in earnest, with the Federal Reserve fresh from raising rates by 25bps in March, following that up with a 50bps rate rise earlier this month, with the promise of another two 50bps moves in June and July.

In the recent CPI numbers, there does appear to be increasing optimism that inflationary pressures are starting to near their peak, although the jury remains out on that. While headline CPI has seen a modest fall to 8.3% in April, producer prices have proved to be slightly more resilient than perhaps Fed officials would like.

The only positive is that the strength of the US dollar is likely to act as an anchor on upward inflationary pressure, and this could start to exert some downside pressure on the headline numbers, although there are early signs that the US dollar move higher has started to run out of steam, as we look to a second successive week of declines, after six consecutive weeks of gains.

Yesterday in the latest quarterly Q1 GDP numbers the Core PCE number fell back from 5.2% to 5.1%, and US policymakers will be looking for further signs that the current bout of inflation is starting to run out of steam and slip back.

Today’s US PCE Core Deflator could offer some clues about that, with the hope that we could see a decline to 4.9% from 5.2% in March. PCE Core Deflator is the Fed’s preferred inflation targeting measure and a softer number here, could give further encouragement to the view that we might see rate pause in September, after Atlanta Fed President Bostic floated the idea earlier this week. The PCE Deflator is expected to fall to 6.2% from 6.6%.

Personal Spending for April is expected to rise by 0.7%, down modestly from 1.1% in March, with personal income set to increase 0.5%.

EUR/USD – We have trend line resistance from the highs this year, as well as the 50-day MA, currently at 1.0760 area. We currently have support at the 1.0530 area.

GBP/USD – Still struggling to gain traction above the 1.2600 area. We need to see a move beyond the 1.2630 area to argue a short-term base is in. Below the 1.2470 area, argues for a move to the 1.2320 area. Above 1.2630 argues for a return to the 1.2830 area

EUR/GBP – Finding support at the 0.8480 area with resistance at 0.8530. Still range bound within the wider range of 0.8200/0.8600. A move through 0.8470 retargets the 0.8420 area.  

USD/JPY – Continues to hold above the 50-day MA, with a break potentially opening a move towards the 123.00 area. We currently have resistance at the 128.30 area, as well as trend line resistance from the highs this month currently at 127.80.

FTSE 100 is expected to open 10 points lower at 7,554.

DAX is expected to open 49 points higher at 14,280.

CAC40 is expected to open 19 points higher at 6,429.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.5% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures