European stocks to open higher as dollar pauses for breath

European stocks are expected to open higher on Wednesday as the U.S. dollar paused for breath after a rally that has been driven by a rise in bond yields following Donald Trump’s victory in the presidential election.

London’s FTSE 100 is seen up 26 points at 6,817, the French CAC is called 18 points higher at 4,554, while the German DAX is expected to open 37 points higher at 10,779.

Traders continue to watch Trump’s economic policies closely for clues on the outlook for interest rates. The Republican has said that he planned to spend on infrastructure and cut taxes to stimulate the economy. Increased fiscal stimulus could have an impact on the Federal Reserve’s interest rate hiking path.

Robert Kaplan, president of the Federal Reserve Bank of Dallas said on Tuesday that it is time to start raising and “normalizing” interest rates because the low rate environment had distorted markets.

The rise in inflation expectations that followed Trump’s win sparked a sell-off in bonds and pushed the dollar higher. The dollar index – which measures the greenback against a basket of currencies – pulled back slightly on Wednesday after a weeklong rally and was trading at around $100. This was off Tuesday’s high of 100.26, the strongest level since December 2015.

Investors in Europe will be keeping an eye on U.K. employment figures due shortly after markets open.

In business news, Volkswagen has reached an agreement with U.S. regulators to fix and buyback around 80,000 polluting Audi, Porsche and VW cars, Reuters reported, citing sources.

Meanwhile, investors in Banca Monte dei Paschi di Siena have given the green light to a debt to equity conversion scheme that is forming part of the troubled lender’s rescue plan.

Source: CNBC