After strong factory activity data from the US and China eased investor concerns over the global economy, European stocks are just marginally higher on Tuesday, as investors await a fresh impetus. Banking sector looks more robust due to a rally in Swedbank shares which gained nearly 6% after the report that Swedish authorities would not investigate money laundering claims made by investor Bill Browder. Meanwhile, on Monday, British Parliament failed to secure a majority for any proposed alternative to Prime Minister Theresa May's Brexit deal, which raises the risk of a no-deal exit.
Against this backdrop, Britain’s FTSE 100 adds 0.73 percent to 7,370, France’s CAC 40 is up 0.28 percent to 5,420, while German DAX 30 gains 0.43 percent to 11,732. US stock index futures are under a mild pressure ahead of the official opening. Dollar demand persists on Tuesday, with traders continue to digest improvements in the US manufacturing activity and construction spending which overshadowed disappointing retail sales figures. EURUSD refreshed nearly one-month lows below 1.12 and remains under the selling pressure, threatening the 2019 lows around 1.1175.
The additional negative pressure on the common currency came from the comments by the European Central Bank Governing Council member and Bank of France Head Villeroy, who said monetary policy will remain accommodative as long as necessary to reach the medium-term inflation target. Should the pressure persist in the near term, the pair may fall below the 1.1190 figure but could face bids around the above mentioned 2019 lows.
USDJPY registered a fresh March 20 high at 111.45 earlier in the day but retreated partially, back to the daily opening levels. The sentiment surrounding the riskier assets has deteriorated somehow but the dollar bulls are still in play. Against this backdrop, the short-term outlook for the pair still looks constructive but the upside potential is limited due to a rather strong resistance in the form of a 200-DMA. A break above this level is needed so that the greenback could target the 112.00 barrier again. On the downside, the immediate support comes at 111.20, where the 100-DMA lies, and then at 111.00.
Brent crude jumped to fresh early-November highs, mainly amid reports that the U.S. is considering imposing more sanctions on Iran “that would target areas of its economy that have not been hit before.” This time, the White House may not grant waivers to a group of eight importers when the current waivers expire next month. This suggests that supply concerns may reemerge and drive the prices even higher should Washington confirm the speculations. Technically, Brent needs to make a clear break above the $70 barrier to extend the rally but the market will need some fresh impetus to push the prices above this psychological threshold.
Nathan Lambert, Head of Global FX Analytical Department