Cautious end to the week

It promises to be a fascinating end to the week as European equity markets steady and US futures pare losses amid planned talks between the US and Russia next week.

Risk aversion swept through the markets on Thursday as the perceived risk of a Russian invasion of Ukraine rose. Much like the weather here in London, Friday was shaping up to be rather treacherous in the markets, that is until US Secretary of State Antony Blinken accepted an invitation to meet Russian Foreign Minister Sergei Lavrov in Europe next week.

While we’re still being warned that a Russian invasion is highly likely, the meeting does offer hope that nothing will happen before then which is bringing some stability in the markets. In the absence of the meeting, it could have been another turbulent day in the markets and we could still see some risk aversion creeping in as we near the close, given how quickly these situations can change.

Rebound in UK retail sales nothing to get excited about

UK retail sales bounced back strongly in January from the slump in December which turned out to be worse than first thought after revisions. It was always likely that we were going to see a strong rebound as December’s figures were heavily impacted by early Christmas shopping and the onset of omicron, so I don’t think anyone is getting too excited by the data.

Not least because the cost-of-living crisis is upon us and it’s not going to get any easier as real incomes are squeezed thanks to a broad array of price increases. The energy price cap increase and higher national insurance contributions will hit household finances again in April. This doesn’t bode well when consumer confidence is already slumping.

Bitcoin battered but holds at key support

Bitcoin got hammered on Thursday alongside other risk assets but importantly saw strong support around USD 40,000 where it continues to trade above. It had held up well in recent weeks, even during periods of risk-aversion, but it was well and truly swept up in it yesterday. A break below here could see it come under some pressure in the near term, especially if combined with broad risk-aversion in the markets.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam