Risk Sentiment Weakens as Markets Reprice Fed and Growth Expectations

Tech valuation concerns, a firmer Fed outlook, and diverging central bank expectations continue to shape cross-asset sentiment and FX positioning.

Hello and welcome to this weeks Wednesday London Session Brief.

Markets are increasingly focused on macroeconomic and valuation-driven themes rather than geopolitical developments. Dollar strength remains the dominant narrative as concerns surrounding technology sector valuations, alongside a firmer Federal Reserve policy outlook, create a more defensive market environment. This shift is placing pressure on risk assets and supporting opportunities across major FX pairs.

Market Analysis

The macro backdrop remains supportive of the US dollar. A combination of technology sector valuation concerns and a firmer Fed dot plot is driving risk aversion across markets and encouraging capital flows into the dollar.

Equity weakness highlights this change in sentiment:

• NASDAQ: -3.22%

• S&P 500: -1.38%

The decline in US equities is becoming an important signal for broader market positioning. The relationship between falling technology stocks, rising market volatility, and dollar demand remains a key theme. As long as risk sentiment deteriorates, the preferred framework is to buy dollar weakness rather than chase risk currencies higher.