After the release of core CPI numbers, all eyes will be on the ECB meeting next when they make their pronouncement on the Eurozone’s interest rate, which currently stands at a record 4.5% after 10 consecutive rate hikes. These moves saw the inflation rate go from 8.5 this time last year, before easing down to the current 2.9%. 

ECB monetary policy rate 

The year 2023 saw the region slump into what many analysts called a “quasi-recession” as the two largest economies, Germany and France, took major hits. These were precipitated by tough ECB monetary restrictions. The ECB’s tightening was considered harsh but necessary, to tame inflation levels that had risen to 10.6% in October 2022. This led to a squeeze in consumer spending which was felt across sectors such as construction and real estate. 

Exports also took a hit as a hike in prices meant less orders, which translated to reduced manufacturing activity in major EU economies like Germany. This has led to successive negative PMI (Purchasing Managers Index) numbers in the Eurozone, with January’s composite number coming in at 47.9. With numbers well below the 50 mark (a benchmark for growth and increased commercial activity), prospects of a recession heightened. 

Eurozone PMI chart

Source: Trading economics

ECB interest rate projections

With Eurozone economies ailing thanks to shocks precipitated by tight monetary policy, analysts have been speculating about a possible ECB rate cut. 

Portugal’s Central Bank Chief, who is also a member of the ECB governing council, had this to say, “March is the date when we have the largest amount of data in front of us- some data may tell us to discuss interest rate cuts as soon as March. I’m not saying that it is likely, but we have to be open.”

He expressed positivity that the inflation rate will be within the ECB target soon, which some analysts see as a positive sign ahead of the council meeting, “Inflation has been consistently below our forecasts in recent months - and growth as well. This is a sign that the downside risks that we identified in the last two forecasts have materialised.”

These statements have left analysts wondering how many members on the council will be in favour of an early March rate cut, as opposed to a delayed approach that could see a cut coming later this year. 

According to a recent Reuters poll, nearly two-thirds of economists predict that the ECB will initiate its first interest rate cut in June. President Lagarde recently emphasised the significance of Q1 wage data, due in May, making June the favoured month for a rate cut among both markets and economists. Among 73 forecasters, 46 anticipate a 25 basis points reduction in June, reflecting a substantial increase from previous estimates. Only 17 economists foresaw a rate cut in April, while 10 suggested that the ECB might defer the decision until the second half of the year. None of the economists surveyed anticipated a rate cut at the March 7 meeting.

EUR/USD price movement

Source: Deriv

At the time of writing, the 50-day simple moving average (SMA) is crossing below the 200-day SMA, signalling a potential beginning of a downtrend. However, the relatively flat nature of these lines, coupled with an RSI of around 45, suggests some market indecision. Traders should closely monitor the decisions of the ECB governing council as they could significantly impact the EUR/USD pair. A surprise rate cut could offer traders opportunities to capitalize on increased volatility.

Keep an eye on the news, and make your EUR/USD speculations with your Deriv account. If you don’t have one yet, sign up for a free demo account, which comes with virtual funds so you can practise your strategies risk-free.  

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In 2024, the global political landscape is set for an exciting time, with more than 60 relevant economies heading to the polls. The 2024 elections will test relations between nations and, more importantly, shape monetary policies that will affect investors trading in commodities and currencies.

US elections

The spotlight is on the US election cycle. This comes at a time of easing inflation, after an intense tightening period that saw 11 successive rate hikes positioning the rate within the 5.25% – 5.50% range. The year 2023 alone saw 4 hikes that culminated into a 100 basis points raise.

After a protracted period of rate hikes, monetary policy analysts predict a “soft landing” in 2024, with the US economy now running at a softer pace. Growth is expected to register at a healthy 1.4% annualised rate this year. 

Despite concerns about what rate policy could mean for the election, historical data shows that an electoral process hardly ever upsets the apple cart. Interest rates were maintained for 6 to 12 months before the 2000, 2012, 2016, and 2020 polls, and many other years before and after.  

UK elections

In the UK, elections are expected to take place either in the second half of 2024 or no later than 28 January 2025. The Tories will fight to keep the premiership away from Labour in what could be a tight race if Rishi Sunak’s party makes political gains in the next few months. 

Possible impacts of election results

We look at how the US and the UK may fare if either party wins the poll.

United States

Election date: Nov 5

Key candidates / parties: Democratic Party, Republican Party

Impact of incumbent win:

• Stability in policies
• Potential rise in prices with increased corporate tax likely
• Stable climate change investment
• Continued military aid to Ukraine
• Trade-friendly policies

Impact of opposition win:

• Policy uncertainty
• International tensions due to likely trade tariff hikes
• Reduced spending on climate change
• Possible withdrawal of  Ukraine aid
• Increased tensions with China
• Business-friendly policies

United Kingdom

Election date: To be determined

Key candidates / parties: Conservative party, Labour party

Impact of incumbent win:

• Tax cuts for businesses
• Grid and renewable energy investment
• British-first business support policy
• Flat ties with the EU

Impact of opposition win:

• Changes in economic policy
• Robust green energy infrastructure
• Investment plan
• Higher taxes for the rich with end of non-dom tax rules
• Increased capital gains tax
• Better ties with the EU

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Historically, US markets have demonstrated a pattern of improved post-election returns after a muted showing in the months preceding the polls. As such, traders, particularly those focusing on the S&P 500, should closely monitor market movements as part of their strategy to make informed decisions for their mid to long-term investments.

Key Asian elections to watch out for

We also look at 2024 elections in key Asian economies and their significance to policy direction, geopolitics, and market direction.

The outcomes of elections in major economies could lead to significant policy shifts or the maintenance of the status quo. In particular, the US election results will have a notable effect on the prices of commodities, stocks, and currencies. Traders should keep an eye on political developments to stay ahead of any market movements.

Keep an eye on market movements and test your strategies risk-free with a free Deriv demo trading account. It comes with virtual funds so you can trade without losing any capital. Once you’re confident in your strategies, upgrade to a real account and trade with real money.

Consider short-term trading as playing Jenga. Each move, each decision, requires that perfect balance. Just as skill and strategy are needed for a well-played Jenga game, successful short-term trading demands precision and a keen understanding of market dynamics. 

Let's break down the art of short-term trading block by block.

What is short-term trading?

In the world of trading, 'short-term' could mean anything from a few minutes to several days. Often termed day trading or swing trading, short-term trading involves the buying and selling of financial instruments within a relatively short time frame. 

Unlike long-term investing, short-term trading demands a keen understanding of market trends, technical analysis, and a disciplined approach.

How to get started with short-term trading

1. Hit the books and educate yourself

The foundation of any short-term trading strategy lies in knowledge. Stay informed about financial markets, economic indicators, and the factors that drive price movements. Continuously monitor reputable financial news sources to keep yourself updated, and make use of online courses to increase your own knowledge and understanding. The more you know, the more confident you can become to make informed decisions.

2. Get technical with technical analysis

Mastering technical analysis is crucial for short-term traders. It’s all about reading the market — charts, trends, and key patterns. Indicators like moving averages, relative strength index (RSI), and stochastic oscillators can provide valuable insights into market conditions. They are a helpful guide in the often volatile world of short-term trading.

3. Manage your risk and control your trades

Financial markets are fast-paced. Short-term trading involves rapid decision-making, and here’s where managing risk becomes your safety net. Determine your risk tolerance before entering a trade, set stop loss orders to limit potential losses, and diversify your trades to spread risk. Remember, only trade with what you can afford to lose. 

4. Develop a trading plan

A well-defined trading plan is the backbone of any short-term trading strategy. Outline your financial goals, risk tolerance, and preferred strategies. Define clear entry and exit points, and stick to the plan even when emotions run high. Keep reviewing and adjusting your plan as you grow.

5. Stay calm and disciplined

Don’t let emotions cloud your judgement and lead you to impulsive decisions. Stick to your strategy, avoid chasing losses, and resist the temptation to deviate from your plan. A disciplined approach will help you navigate the emotional roller coaster that can often accompany short-term trading.

6. Upgrade your trades with technology

Leverage technology to boost your trading efficiency. Use your platform’s trading tools and stay on top of real-time market data. Take advantage of automated trading systems that execute trades based on your predetermined criteria — it’ll help you seize market opportunities without needing to constantly monitor your trades. 

7. Reflect, learn, adapt — continuously

The financial markets are dynamic and always changing. Make it a habit to evaluate your performance, analyse successful and unsuccessful trades, and identify areas for improvement. Use every opportunity to learn, and keep adapting your strategies as you evolve with the market. 

Short-term trading is a continuous journey that demands a blend of education, discipline, and flexibility. But armed with the right strategies and a commitment to continuous learning, you’ll be equipping yourself with the tools and mindset needed to navigate the markets’ ups and downs. 

Practise your strategies with a free Deriv demo trading account. It comes with virtual funds so you can test the waters risk-free. When you’re confident in your strategies, upgrade to a real account to start trading with real money.

Disclaimer:

The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice.

Trading is risky. Past performance is not indicative of future results. It is recommended to do your own research prior to making any trading decisions.

You may also like:

https://blog.deriv.com/posts/what-are-vanilla-options-and-how-they-work

https://blog.deriv.com/posts/comparative-analysis-deriv-bot-trading-strategies

https://blog.deriv.com/posts/beginners-guide-to-types-of-etfs

In this latest Market Radar, join us as we explore key stock earnings from:

• Airbnb (ABNB)
• Biogen (BIIB)
• Coca-Cola (KO)

Stay informed with our weekly market analysis on Market Radar.

In this latest Market Radar, we explore some of the crucial data indicators that may impact your trading decisions this week:

• US inflation data
• UK Gross Domestic Product (GDP)
• UK Consumer Price Index (CPI)
• UK Retail Sales

Stay informed with our weekly market analysis on Market Radar.

In this latest Market Radar, we explore the latest market movers and crypto trends. This week, we are focusing on:

• Bitcoin Rally
• Bitcoin ETFs

Stay informed with our weekly market analysis on Market Radar.

In this latest Market Radar, join us as we explore key stock earnings from:

• Walt Disney (DIS)
• Uber (UBER)
• Alibaba (BABA)

Stay informed with our weekly market analysis on Market Radar.

The Wall Street Journal: US strong growth & market reaction

• Employers added 353,000 jobs, exceeding expectations and signalling robust economic strength.
• Bond yields surged post-report, suggesting investor confidence in a delayed Federal Reserve rate cut.
• The payroll report could keep the Fed on hold for now, with the next meeting on March 19-20.
• While stocks saw gains, smaller companies faced challenges amidst concerns over prolonged rate cuts.

Kitco: Survey on 2024 gold and silver

• UBS predicts gold and silver to climb amid expectations of Federal Reserve rate cuts.
• Gold thrives as interest rates fall, offering a hedge against low bond yields.
• Silver could outperform gold in a scenario of Fed easing, says UBS strategist.
• Mixed opinions: Alliance Financial sees gold declining further, while Zaye Capital Markets remains cautious.

9news: Australian Central Bank rate decision 06 Feb

• Reserve Bank of Australia (RBA) expected to maintain cash rate, update economic outlook
• December Consumer Price Index (CPI) shows 4.1% inflation
• Organisation for Economic Co-operation and Development (OECD) warns central banks against swift interest rate cuts
• RBA to hold eight meetings in 2024, skipping April, July, October
• AUDUSD below 10-day and 50-day moving averages, signalling potential weakness

The Business Standard: China CPI on 08 Feb

• Deflationary pressures rise: Weak domestic demand
• Importance of supportive fiscal policy emphasised
• Consumer behaviour affected: Delayed purchases expected
• Beijing's fiscal policy boost: Increased budget deficit, encouragement for banks
• Pork prices impact: Slumping prices affect CPI figures
• Ample hog supply & sluggish consumption contribute

ABC News: RBA holds rates

• RBA decision to keep rates on hold had been widely anticipated
• An increasing number of economists now expect the RBA to start cutting rates in the second half of this year as inflation continues to moderate
• RBA statement: Inflation continued to ease in the December quarter. Despite this progress, inflation remains high at 4.1%.
• Returning inflation to target within a reasonable timeframe remains the RBA Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.

CNBC and Reuters: General Motors recall 

• General Motors is recalling 323,232 vehicles to address an issue with the tailgate that may open while driving, potentially causing a road hazard, the National Highway Traffic Safety Administration.
• U.S. vehicle sales increased 14.1%, reported sales of roughly 2.6 million vehicles in 2023, representing the automaker’s best year since 2019.
• Compared to its competitors in the US, Toyota sold 2.3 million, and Honda sold 1.3 million cars in 2023.

Reuters: Uncertainty creeps back to US Treasury

• Treasury yield surge
• Fed caution sparks recalibration
• 10-year Treasury yield up 20 basis points
• Concerns over bond supply surge
• Expected 2 trillion USD in new government bond issuance
• Robert Tipp, PGIM Fixed Income predicts 10-year yields approaching 5%
• John Madziyire, Vanguard plans to start climbing to 4.5%

Yahoo & BNN Bloomberg: Citigroup warns on Nasdaq

• Citigroup Inc. strategists warn of potential wider rout
• Nasdaq 100 futures bearish wagers completely erased
• Goldman Sachs' Scott Rubner cautions on potential market downturn

Wall Street Journal and CFR: Deflation Tightens in China

• China's consumer prices drop by 0.8% YoY in January
• Prices of fruit, vegetables, and meat decline
• Pork prices plummet by 17.3% YoY
• Income growth slows, challenging debt servicing and spending
• Corporate profits decline, hindering investment and hiring
• Balance-sheet recession looms as debt burden rises
• People’s Bank of China fixes central parity rate to prevent yuan depreciation

Seeking Alpha: JP Morgan says crude oil can rise another 10

• Crude oil expected to surge 10 USD more by May
• JP Morgan forecasts tightening market
• Global economy showing signs of improvement
• Crude inventories decline across regions

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Disclaimer:

The information contained in this blog is for educational purposes only and is not intended as financial or investment advice. It is considered accurate and correct at the date of publication by the sources. Changes in circumstances after the time of publication may impact the accuracy of the information.

The performance figures quoted refer to the past, and past performance is not a guarantee of future performance or a reliable guide to future performance.

We recommend you do your own research before making any trading decisions.

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