Midday Brief
Investors’ mood is at ease as markets respond positively towards the quick response by the US and EU governments over the short supply shock caused by the Ukraine/Russia war.
The markets found some level of insurance from Europe’s swift action to find solutions to limit reliance on Russian energy. The US’s mobilization of monetary policy is a step towards clamping down inflation towards normalization.
The Dollar Index retreated from near-term highs as markets took a breather on Wednesday. The index shaded off gains for the second day from the 22-months peak at 99.00, losing -0.4%. The demand for safe haven currencies is gradually diminishing in the near term amid divergence in response to the oil supply crisis.
The EURUSD rose 0.64% early European session, in an attempt to reclaim the 1.1000 near-term barriers. The EURUSD extended gains for the second day ahead of this week’s EU emergency summit as well as the latest ECB monetary policy meeting. The pair is on a recovery trajectory as optimism from the European Commission’s initiative of raising a debt fund to finance infrastructure in the energy and defense sector.
A break above that psychological resistance may give room for further upside gains and investors are focusing on the outcome of the ECB press conference on Thursday.
The AUDJPY edged higher early Wednesday morning as bulls defend near-term support at 84.00. Negative GDP reports for Japan released on Wednesday morning continue to suppress the yen in the near term amid diminishing safe-haven demand. AUDJPY rose 0.97% as bulls attempt to break above 85.00 near-term resistance. A break above that high may pave way for renewed bullish appetite towards 86.00.
The GBPUSD ticked higher, gaining +0.41% on renewed risk appetite although gains remain capped by US inflation and Jobless claims data due for release on Thursday. The pair is slightly above 1.3148 which coincides with Tuesday’s high and upside movement is capped by 1.3200 near-term psychological resistance. Investors will focus on the Crude oil inventories and JOLTS Job Openings.
European equity markets opened higher with indices performing well after European Commission reports of raising a fiscal fund to relieve the market from energy shortages. Investors seem optimistic in the near term although sentiments remain fragile due to Russian threats of cutting current energy supplies into Europe.
CAC40 rose +3.25% for the 3rd session although upside momentum remains capped under 6247.00 near-term support turned resistance. The FTSE gained 1.18% as bulls attempt to reclaim the 7100 area while DAX gapped +4.88% higher leaving room for a possible closing of 13565.00 and 13685.45 area before a significant direction.
US equity markets ended lower on Tuesday as investors followed the developments of Ukraine and the impact of the US response on banning Russian oil imports. The Nasdaq was down -0.39% above near-term support at 13050.00 while the DJIA closed -0.56% lower although bears are capped by 32270 11-months low.
The S&P 500 was down 0.72%, however, equities could be set for a rebound as investors eye US Inflation data due for release on Thursday.
