Trade-war concerns which reemerged yesterday, after new threats by Trump, continue to drag global stock markets lower on Thursday. After a dismal dynamics in Asia, European indices are following lower, with US stock futures pointing towards a negative open as well. Apart from trade issues, investor sentiment is further derailed by disappointing quarterly results. As such, German DAX 30 feels the additional pressure from weak financial updates from Siemens and BMW. In general, trade concerns obviously dominate market sentiment and it looks like the picture wont’ improve substantially at least for the rest of the week. As such, Britain’s FTSE 100 sheds 1.3per cent to 7,587, France’s CAC 40 loses 0.73 per cent to 5,458, while German DAX 30 sinks by 1.68 per cent to 12,523.
The sterling was unfazed by the Bank of England decision to hike rates, which was widely expected. But then Carney’s press-conference has pushed the currency down across the board as the central bank governor made it clear that the monetary authorities are not in a hurry to hike further. Besides, Carney highlighted risks from Brexit and trade wars. As a result of a “dovish hike”, the pound sunk across the board, though managed to hold above the 1.30 key support area. GBPUSD has been nursing losses for a fourth week in a row, which is the longest losing streak since 2016. Considering the dovish and cautious Bank of England position against the backdrop of further tightening in the US, the risks for the pair are still skewed to the downside, especially amid the lingering Brexit uncertainty and the remaining threat of a don-deal divorce. As such, the pound will likely continue to attract sellers on rallies and could derail the 1.30 level again.
The dollar itself feels quite comfortable and confident against major rivals except for the yen which is in demand amid the risk-off sentiment. Apart from trade jitters, the buck feels support from the Fed’s rhetoric. Yesterday, the central bank has confirmed its commitment to further tightening and pointed to “strong” GDP growth instead of “solid” earlier. As such, it seems that for now, the USD’s bullish trend is still safe and sound. EURUSD has been retracing for a third day in a row, with the pair dived under the 20-DMA once again. The price found a local support in the 1.16 area and could stay above this level for now as USD bulls may take a more cautious tone ahead of the key NFP employment data due on Friday.
The US labor market data conclude a busy trading week, with traders will pay a special attention to wages data. The average hourly earnings are expected to rise by 0.3% mom in July, from 0.2% earlier. Should the indicator come in as expected or above, the greenback will accelerate its bullish move and could send the euro and pound below 1.16 and 1.30, respectively. As for the USDJPY, the price remains under pressure, but still hasn’t derailed the rally that took place two days ago. The downside potential is limited as long as the pair is trading above the 111.00 figure.
As for the crude oil market, Brent continues to lose ground since Tuesday. Traders can’t stop exiting longs, driving prices to more than two-week lows below the $72 mark. The fact that the price has derailed this level points to the risk of further decline in the short term, despite the fact that Brent has already reached levels which look more attractive for buyers. At this stage the market sentiment has been additionally disrupted by the escalation of a trade war as any new aggressive signal from this front makes investors worry about the prospects of crude oil demand from China and globally as well. On the other hand, amid the short-term oversold conditions, Brent may trim losses and close the day above the $72 threshold.
Nathan Lambert, Head of Global FX Analytical Department