Financial market research and analysis

Asia moved higher overnight and European and US futures were pointing to a stronger start across the board, lifted again by trade talk optimism and the promise of patience by the Fed.

There was something for everyone in the January Fed minutes. The minutes showed that the Fed were comfortable adopting the more patient approach to hikes. The Fed saw no problems arising by keeping rates on hold in the face of headwinds such as trade tensions and slowing global growth. This is unlike previous meetings where they have considered it potentially dangerous to sit on their hands. These comments were supportive to equities with the Dow booking a third consecutive positive session.

The Fed also gave themselves room to hike rates should conditions require a reassessment of a patient approach. Dollar traders grabbed onto these comments, lifting the buck after the meeting. Although the dollar is paring those gains in early trade on Thursday.

Finally, for all those that had been focusing on the Fed’s reduction of its balance sheet, the fact that Fed officials want to see a plan announced to stop the rolling off of assets from the balance sheet was also a crowd pleaser. There had been concerns that the Fed would continue reducing the balance sheets regardless of tightening financial conditions.

Trade Talk Progress Boosts Risk Sentiment

Asian markets rallied to 4 ½ month highs, also boosted by trade talk progress. Both sides are working on multiple memorandums of understanding that would form the basis of the final trade deal. Renewed signals of a trade agreement harvested a risk on sentiment overnight, putting fresh legs on the risk-on rally which had been showing signs of slowing.

Euro Cautiously Higher Ahead of Barrage of Data

The euro was edging higher towards $1.1350 in early trade and ahead of a busy day of economic releases. PMI figures from the bloc, in addition to German inflation and minutes from the ECB monetary policy meeting mean a volatile session could be ahead. Concerns over the health of the Eurozone and German economy could ease slightly should the closely watched pmi data come in better than expected. German manufacturing activity, whilst in contraction territory is expected to increase slightly. This would help alleviate fears of recession in the Eurozone’s largest economy and boost the euro.

The minutes from the ECB meeting are expected to be dovish and are likely to reiterate concerns over the Eurozone economy. However, this is nothing new for euro traders meaning a move to the downside could be limited.

The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 79 % of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.