Global stocks rally on Fed hike hopes

Stock markets surged with ferocity during trading on Tuesday following the incredible US new homes sales report, which reinforced expectations over the Federal Reserve raising US rates in Q2. American equities lurched to fresh highs as the dissipating fears over a potential economic slowdown in the world’s largest economy encouraged bulls to send the S&P 500 to levels not seen in more than two months. In Asia, most stocks concluded positive and the bullish contagion has already offered inspiration for European equities to lurch higher. With optimism rapidly increasing that a rate hike could be on the table in June or July, risk appetite has returned and investors could seek riskier assets.

If data from the States continues to follow a positive path, then the elevated rate hike expectations could keep stocks buoyed. The mayor concern in this scenario is if that the Fed fails to raise US rates in Q2 amid the heightening speculation, investors will be left empty handed once again, and then global stocks could be poised for an unprecedented selloff which would rock the financial markets.

Bremain camp empowers Sterling

The Sterling bulls were installed with inspiration during trading on Tuesday as the “Bremain” camp displayed dominance in the chaotic battle ahead of the EU referendum vote in June. It seems that the recurrent warnings from major financial heavyweights over the unfathomable impacts of a Brexit to the UK economy may have swayed voters to the “Bremain” side. Although bulls may be commended on their ability to exploit this opportunity to send the Sterling higher across the board, the currency may be poised to decline as uncertainty continues to mount ahead of the vote day.

Dollar bulls prosper

Sentiment towards the US economy received an uplift during trading this week following the impressive new homes sales report that reduced previous concerns over slowing domestic growth. With retail sales, inflation and even home sales exceeding expectations, the Fed may have been provided a compelling reason to raise US rates again. If the NFP figure for May follows this same positive route then this could seal the deal for the central bank to take action in July. Although the data dependency prerequisites of a US rate hike may have been fulfilled, the ongoing global developments still have a potential to obstructing all efforts made by the Fed to take action.

WTI Crude eyes $49.50

WTI crude prices surged towards $49.50 during trading on Wednesday following the recent reports that displayed a larger than expected drawdown in US crude inventories the previous week. For an extended period prices have been scraping below the $49.50 level and it seems likely that the pending OPEC meeting may offer direction. Expectations are already low that a freeze deal could be struck, and this could offer a platform for bearish investors to install a heavy round of selling. Although short term disruptions from major oil export nations have caused production to decline, it should be kept in mind that Iran remains on a quest to boost output. This is a waiting game and bears should pounce again once the oversupply woes drown the markets consequently haunting investor attraction towards oil.

Commodity spotlight – Gold

Gold bears have displayed dominance this trading week with Gold prices plummeting below $1230 as expectations mount over the Fed raising US rates in June or July. Unfortunately, this zero yielding metal is losing its allure as a strong Dollar and rising optimism over a US hike encourages bearish investors to attack incessantly. For an extended period, Gold has also been sensitive to US rates and this decline could send the metal towards $1200 before the Fed meeting in middle June. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. Bears may send prices to the next major support at $1210.


Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.