Morning Market Commentary
A worrying reversal from the Dow overnight has led to a negative start in Europe. The Dow dumped 283 points from above 26,000 to finish the day 10 points lower. As a result, the FTSE rapidly lost 0.2% in early trading, with Burberry (LON:BRBY), Informa (LON:INF) and Pearson (LON:PSON) exasperating losses thanks to poor corporate updates
Whilst there was no obvious cause for the selloff, there is some suggestion that rising concerns over the US shutdown is weighing on investors minds. Congress has until Friday to pass a new spending bill, or else face a US government shut down; immigration discussions have been complicating efforts to reach a deal on government spending.
The dollar has also been a casualty of shutdown concerns, with the dollar hitting a fresh 3 year low of 90.113 overnight. As fears over a US government shutdown have eased early this morning, the dollar has since climbed back up 0.3% to 90.70
Eurozone inflation to tick lower?
Inflation data for the eurozone will be the principal focus for traders in the European session. Eurozone inflation is expected to have slowed slightly to 1.4% in December, down from 1.5% in November. Meanwhile core inflation is forecast to remain constant at 0.9%.
The eurozone has struggled with inflation across the previous year and concerns over sluggish price increases are unlikely to be going anywhere soon. Whilst rising oil process should help eurozone inflation, this is being counteracted by a strong euro, as the ECB unwinds its current bond buying programme.
The EUR/USD is trading 0.3% lower leading into the reading at $1.1220. A soft reading could trigger a sell off in the pair, which is showing signs of bullish exhaustion. On the way down the pair could find support at $1.22, followed by $1.2170. Meanwhile, signs that inflation is indeed moving higher towards the ECB’s target level of 2%, could see the EUR/USD encounter resistance around $1.23 prior to $1.2325
Bitcoin sell off continues
Bitcoin briefly tumbled below $10,000 on Tuesday evening, less than two months after it first broke the key psychological level in November. Other major cryptocurrencies also experienced heavy losses on Tuesday, as $206 billion was wiped off the cryptocurrency market overnight.
The sell off comes amid concerns of fresh crackdowns on virtual currencies by the South Korean and Chinese government and as governments across the globe are struggling as how best to regulate bitcoin. At its lowest Bitcoin was down 28% at $9969, before quickly jumping back up to $11,000.
Despite the fact that bitcoin has almost halved from its peak of $19,800 reached mid-December, it still remains 1100% higher than it was 12 months ago. However, we could be seeing an important loss of momentum, especially given that Bitcoin hasn’t traded above $15,000 since Tuesday. $10,000 level is an important junction because it is a huge psychological level. At the first attempt, the price has bounced higher, but if bitcoin head towards this level again, investors may not actually step in to buy the dip and instead selling pressure could continue to dominate. Bitcoin has resumed the selloff today.
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Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.