Confidence building

Stock markets are making decent gains in Europe on Wednesday and US futures are also being led higher as confidence continues to build following a torrid start to the year.

Investors’ mood brightens

It’s hard to pinpoint exactly what has changed; whether it’s earnings that are lifting the mood or the soothing tones of central bankers desperately trying to manage expectations. Perhaps it’s simply a case of investors coming to terms with the tightening environment and feeling more comfortable with it.

Whatever the reason, investors certainly appear encouraged by the fact that the falling knife period looks to be in the rear-view mirror and we’re now seeing signs of stabilization. In recent week’s we’ve also seen periods of aggressive selling being bought into which has helped create the impression that the worst is behind us.

Of course, that could change quickly if the inflation outlook worsens, as has repeatedly been the case in recent months. And we won’t have to wait long for the next hurdle on that front, with the US CPI data being keenly anticipated tomorrow.

Before then, we’ll hear from Loretta Mester and Michelle Bowman from the Federal Reserve, and Huw Pill from the Bank of England. Both central banks have become far more hawkish in recent months but I expect we’ll see some caution in the wording as none will want to needlessly spook financial markets.

Bitcoin recovery looking promising

The bitcoin price is easing a little again today after running into resistance around USD 45,500 on Tuesday. The risk relationship has become a little disconnected over the last week or so, with bitcoin appearing to front-run some of the recovery in stock markets. Risk appetite has improved this week which has coincided with some profit-taking in bitcoin. It continues to look promising though and a break of USD 45,500 would be another important and bullish hurdle.

For a look at all of today’s economic events, check out our economic calendar:

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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