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Traders on edge ahead of key events

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By Naeem Aslam  

Investors in Europe and the US are preparing for a volatile week as the economic docket is full of fireworks.

Since last week, concerns about the Fed’s interest rate cycle have begun to surface again, as speculators believe that there are greater chances that the Fed will use more gunshot in terms of interest rate going into the next month’s meeting. This is mainly because of the economic data that was released last week, and things are likely to become more stable in light of the economic numbers that are due this week.

The key economic number for the US will be inflation, which is likely to influence everything from stocks to forex to fixed income to commodity prices. The consumer price index numbers are scheduled on Wednesday, and the consumer price index data will be released on Thursday.

Due to the fact that oil prices are moving in only one direction, investors fear that we are more than likely to see a trend in the inflation data, which would upset many on Wall Street, especially the Fed.

As for European investors, they are likely to remain on their toes this week as the ECB will announce its monetary policy decision.

The European Central Bank is expected to take a closer look at the current economic conditions of the Eurozone’s biggest economies, and traders expect the bank will not make any decision that will cause a need for urgent treatment in the emergency rooms.

Yes, it is true that economic conditions are very fragile and the overall Eurozone is highly sick as economic activity remains immensely slow, but signs are emerging of some recovery.

And if the ECB takes any notorious action, such as sending an ultra-hawkish message in terms of its interest rate or increasing interest rates going into their meeting this week, we could see some consequences for which many would not have prepared.

Overall, calm sailing is what many expect from the ECB for this meeting, no hike in the interest rate this month.

Oil prices begin week on positive note

Oil prices continue to remain highly interesting, and this is because bears are having an extremely difficult time taming the current bull run.

Despite slow economic activity in China, Brent oil prices continue to trade above $90, which sends a strong signal to bears: this is not the time to fly against the wind.

Brent crude has already posted two consecutive weeks of strong gains, and the chances are that the price will win its major battle on the weekly time frame against the 100-week moving average, which is trading around 91.

This can happen on the back of economic numbers that are scheduled to come out from the US and Europe.

If central banks do not take any aggressive action in terms of their monetary policy, their action is likely to be taken as positive by traders, which means a more positive growth outcome. And strong growth prospects usually mean that prices are likely to move.

 

Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.