European stock markets fell on the last trading day of August and started a new month on a mixed note, with UK shares being under severe selling pressure after weaker-than-expected economic data. Regional stocks pared early gains after fresh economic data showed consumer prices in the Eurozone fell for the first time in four years. In particular, the preliminary annual reading came in at -0.2% in August versus expectations of +0.2% and +0.4% previous. The core figure rose to +0.4% when compared to +0.9% expectations and +1.2% previous.
On the positive side, in its latest economic forecasts for this year, Germany’s Economy Ministry revised up the GDP estimate to -5.8% versus the previous forecast of -6.3%. The officials also noted that they don’t expect another coronavirus lockdown like in March and April.
Against this backdrop, the UK FTSE 100 index edges lower by 1.15% to 5895,06, Italy’s FTSE MIB edges higher by 0.59 percent to 19,749, France’s CAC 40 gains 0.24 percent to 4,959, while German DAX 30 rises by 0.68 percent to 13,033. U.S. stock index futures climb higher after a mixed session overnight. US ISM manufacturing data is due later today.
In currencies, the dollar keeps bleeding nearly across the board. EURUSD rallied to the 1.20 handle and registered fresh two-year highs. Since then, the euro retreated partially as traders were disappointed by weak inflation data out of the Eurozone. In general, the common currency remains within a strong upward trend as the dollar continues to lose its appeal amid a dovish shift in the Federal Reserve policy. However, the pair may need the additional catalyst to challenge the mentioned strong barrier and refresh long-term highs as the psychological level could deter bulls and trigger a downside correction amid profit-taking in the short term.
Elsewhere, gold prices are rising on Tuesday, buoyed by a weaker dollar. The precious metal is nearing the $2,000 handle for the first time in nearly two weeks and could retain its bullish tone as long as the greenback stays on the beak foot. Later in the day, fresh economic data out of the United States could ease the selling pressure surrounding the American currency if the figures come in better than expected. Otherwise, the bullion will extend the local rally and could regain the round mark by the end of the day.
Nathan Lambert, Head of Global FX Analytical Department