Central Banks Signal Temporary Concerns over Inflation, Traders Continue to Buy the Dip, While Oil is the Market to Watch in the Weeks Ahead
- Trading Systems , Investment
- 25.06.2021 09:00 am
David Jones, Chief Market Strategist at European investment trading platform,Capital com, said: “It has been a calmer week in markets following the interest rate-inspired fireworks we had at the end of last week. In fact, it has been business as usual for many major assets.
"Crude oil pushed higher again, trading briefly above $74 to set its best levels since October 2018. Both the US and NASDAQ stock market indices hit fresh all-time highs, shrugging off the volatility seen last Thursday and Friday where the threat of rates rising sooner rather than later sent investors heading for the exit.
"Perhaps oil is the maket to watch in the weeks ahead and will give us a hint as to whether investors' nerves are starting to crack. Markets are speculating that crude will hit $100 per barrel, which, let's not forget, famously traded negative in April 2020. When even the pessimists are starting to join the bulls, that's precisely the time to start wondering if perhaps the incredible recovery we've seen across many asset classes has gone far enough.
"It is at times like this of course that markets could be thought to be the most vulnerable - and investors become over-complacent, as riskier assets bounce back from various mini-panics. But traders so far seem happy to step in and buy the dip.
"The spectre of inflation is still out there, with the Bank of England (BoE) adding its voice to the chorus of central bankers aware of the risk of rising prices, but the BoE does not look overly concerned. UK inflation is at a 2 year high but, like its American counterpart, the BoE expects any move higher to be just temporary. It remains to be seen whether this central bank sang-froid comes back to bite these venerable institutions later in thie year.
"Meanwhile, the crypto faithful felt more pain this week as Bitcoin dipped briefly below $30,000 - but even that was seen as something of an early summer sale and, so far at least, it has managed to bounce-back by more than 10% in a matter of days.”