Market Snapshot – We Are Seeing a Change in Dynamics

Stock Markets Continue to Fall

It is ironical to see the European stock markets falling as the data from the Eurozone keeps improving on a daily basis. Normally it is the other way round and thats how it should be as a strengthening economy is likely to bolster investor confidence and make them invest more and more into the region. On the other hand, we have been seeing the stock markets falling as the realisation begins to gain ground that the ECB is close to begin tapering. Though the ECB source yesterday said that Draghi’s comments regarding tapering wasnt as hawkish as the market had interpreted, it hasnt dampened the expectations one bit as the market is pretty much convinced that tapering is on the way. That is why we have been seeing the currencies rising and the stock markets falling.

Dollar Weakens As European Currencies Gain

On the currency front, we are seeing a change in the dynamics in the market as the dollar weakens across the board and the euro and the pound begin to gain in strength. The dollar weakness is more due to the failure in the implementation of policies and hence more to do with administrative lapses rather than anything to do with the Fed or the economy. The ECB, BOE and BOC on the other hand, seem to be ready to reverse their policy of the last few years and begin to think of tapering and rate hiking as well. This has brought about a situation where all the currencies have begun to gain on the dollar which we have been seeing over the last few days and which continues today as well.

Gold in Confused State

Gold seems to be caught in this whirlwind and does not seem to know what it should be doing. Rather than choose a specific direction, it seems to be confused and that is why we have been seeing some solid consolidation and ranging between the support and resistance regions since the beginning of this week.