Most European markets are trading higher on Friday, as investors cheer strong Chinese manufacturing activity data and positive economic updates out of the US. China Caixin/Markit manufacturing PMI came in at 51.7 versus 51.0 expected and 51.4 in September. As the factory activity expanded at its quickest pace since February 2017, investor concerns over slowing global growth have eased somehow. Meanwhile, the US economy created 128K jobs during October, surprising markets to the upside. The jobless rate edged a tad higher to 3.6% from 3.5% and average hourly earnings expanded by 0.2% and 0.3% on a monthly and annualized basis respectively.
Against this backdrop, UK’s FTSE 100 gains 0.50 per cent to 7284, Italy’s FTSE MIB gains 0.90 per cent to 22,896, France’s CAC 40 rises by 0.68 per cent to 5,768, and German DAX 30 gains 0.71 per cent to 12,958. Meanwhile, US stocks index futures extend gains, signaling a higher start for Wall Street after data showed domestic job growth slowed less than expected in October, in addition to the fact that hiring in the prior two months was stronger than previously estimated.
Stronger-than-expected US jobs data helped to ease the selling pressure on the greenback. The US currency remains on the defensive since last FOMC meeting as the Federal Reserve signaled it won’t start hiking unless inflation picks up substantially. Meanwhile, the uncertainty around the US-China trade deal dents the appeal of the greenback. After economic updates, the USD index rose to session highs and trimmed intraday losses against major counterparts.
As such, EURUSD was rejected from the 1.1170 area and turned flat on the day after a brief dip towards the 100-DMA around 1.1130. in the weekly charts however the single currency shows solid gains after a bearish week. Meanwhile, USDJPY registered fresh three-week low of 107.88 earlier in the day and jumped back above the 108.00 handle after the data releases. Despite the bounce, the technical picture in both hourly and daily charts remains negative as long as the greenback stays below the key 200-DMA around 109.00. Should the pair fail to confirm a break above 108.00, short-term downside risks could intensify.
In commodities, Brent crude has finally bounced from daily lows around $59.40 and regained the $60 figure. Despite the local recovery, the market finishes this week with solid losses as concerns over trade and economy continued to drag the prices lower, along with rising oil output in the US. In a positive sign, Brent managed to stay above the 200-weekly MA this week, which could be a signal that the market has found local bottom and could gradually regain ground should positive trade-related headlines reemerge in the short term.
Nathan Lambert, Head of Global FX Analytical Department