All stock markets are in the red today

What Turned the Market Sentiment Sour Today?

Posted Friday, October 26, 2018 by
Skerdian Meta • 1 min read

Yesterday, the market sentiment turned positive in the afternoon, after it had been negative for quite a long time. As a result, stock markets retraced higher while safe haven assets such as Gold and the JPY slipped lower.

But, this morning, the sentiment has turned negative again. Stock markets opened with a bearish gap lower as I mentioned in one of the previous updates earlier. On the other hand, safe havens are surging higher, with Gold jumping nearly $10 higher while USD/JPY has lost around 80 pips since last night.

The reason for the deteriorating sentiment this morning could be the lower growth forecasts for the Eurozone that the ECB released this morning. Let’s list the ECB forecasts for growth and inflation below:

  • 2018 growth seen at 2.0% – down from 2.2%
  • 2019 growth seen at 1.8% – down from 1.9%
  • 2020 growth seen at 1.6% – unchanged
  • Main Inflation seen averaging at 1.7% in 2018, 2019, 2020 – unchanged
  • Core inflation seen at 1.1% for 2018 – down from 1.2%
  • Core inflation seen at 1.4% for 2019 – down from 1.5%
  • Core inflation seen at 1.7% for 2020 – unchanged

Growth and core inflation forecasts have been revised lower.

Another reason might be the comments from Italian politician Claudio Borghi who said that he expects the S&P rating to be moderate. This means that Borghi is expecting a downgrade. He added that ECB’s Draghi should talk about Italy leaving the Euro area and ECB’s comments on Italian banks can cause more problems.

The situation in Italy has been a major factor for the negative sentiment so these comments are having some impact today. Or perhaps, it might just be the market itself that resumes the recent trend today after the retrace yesterday in the afternoon. Although, I think it is all of the above reasons together that have turned the sentiment sour in financial markets today.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies

About the author

Skerdian Meta is our Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
Related Articles
eToro announces a significant cut in spreads on cryptoassets to increase awareness of the potential of crypto and blockchain more broadly
SPONSORED
Comments

Leave a Reply

avatar
  Subscribe  
Notify of