Market sentiment analysis:
- Markets are stable as traders wait for more information about the spread of the Omicron coronavirus variant and the meetings this week of the Federal Reserve, the ECB, the Bank of England and the Bank of Japan.
- Traders will need to be cautious until those meetings are over and trends become clearer.
Trader caution called for
Traders need to be cautious this week ahead of news about the spread of the Omicron coronavirus variant and a slew of central bank meetings: the Federal Reserve announces its decision on monetary policy Wednesday, followed by the European Central Bank and the Bank of England Thursday, and the Bank of Japan Friday.
The Fed will be especially important for market sentiment as it is expected to be hawkish after news that US inflation has hit its highest level since 1982, and a decision to reduce its bond-buying program faster than previously expected is on the cards. Neither the ECB nor the BoE are expected to follow suit, particularly as evidence is building for a slowdown in Germany and new restrictions are being introduced in the UK because of Covid-19 worries.
Still, the major trend in pairs like EUR/USD[1] is lower, and that could mean more losses once the current period of consolidation is over.
EUR/USD Price Chart, Daily Timeframe (May 11 – December 14, 2021)
Chart by IG (You can click on it for a larger image)
How to Trade Gold: Top Gold Trading Strategies and Tips[2]
Busy week for sentiment data
This week is also busy for forward-looking data that could impact sentiment. Among the highlights are “flash” purchasing managers’ indexes for most of the major economies Thursday, as well as the Ifo business climate index for Germany Friday.
As for the IG
