European stocks are mostly positive on Monday, as investors are cheering upbeat economic data. The Caixin China manufacturing purchasing managers index rose to 52.8 in July, with the best readings for output and new orders since January 2011. In Spain, manufacturing PMI rose to 53.5, its best result in over two years and the final manufacturing PMI reading for the Eurozone came in stronger than the flash report. Meanwhile, UK July final manufacturing PMI arrived at 53.3 versus the preliminary estimate of 53.6.
On the coronavirus front, the Australian state of Victoria reported 429 new coronavirus cases on Monday. Also on the negative side, U.S. Secretary of State Mike Pompeo said Sunday that U.S. President Donald Trump is set to announce in the coming days new actions related to Chinese software companies viewed by his administration as a national security threat.
Against this backdrop, the UK’s FTSE 100 adds just 0.07 percent to 5,902. Italy’s FTSE MIB edges higher by 0.24 percent to 19,137, France’s CAC 40 gains 0.31 percent to 4,898, while German DAX 30 rises by 1.28 percent to 12,471. U.S. stock index futures are mostly flat as investors await another portion of corporate earnings and fresh economic data due this week.
In currencies, the dollar continues its recovery on Monday but the momentum seems to be easing following strong gains witnessed on Friday amid a massive liquidation in short positions. After an aggressive decline seen over the past couple of weeks, a rebound in USD demand looks actual. However, considering the current dynamics, its bullish potential is limited at this stage. This week, traders will continue to follow developments in Washington where authorities discuss a fiscal stimulus package. Also, the US NFP employment report along with other releases will be in market focus.
EURUSD was rejected from fresh two-year highs above 1.19 on Friday and extended the correction to the 1.1735 area so far. A break below the 1.17 handle could open the way to a more aggressive retreat in the short term while the bullish trend on longer-term timeframes remains intact. As the daily RSI has reversed lower, the euro is expected to remain under the selling pressure in the immediate term.
Meanwhile, Brent crude has settled around the $43 handle after failed attempts to challenge the $43.40 intermediate resistance earlier in the day. Oil traders continue to express worries about the outlook for a recovery in global energy demand amid the ongoing pandemic. Rising political uncertainty in the United States ahead of the November election also hurts sentiment in the oil market. In the short term, Brent struggles amid dollar strength.
Nathan Lambert, Head of Global FX Analytical Department