Following another rally on Wall Street and mostly positive tone in Asia, European stock markets opened marginally higher on Friday. However, gains look limited, signaling potential profit-taking ahead of the weekend. In a wider picture, however, investor sentiment remains positive amid hopes for global economic recovery due to vaccination rollout, strong corporate earnings, stimulus expectations, and the slowing rise in coronavirus cases. On the data front, UK January Halifax house prices came in at -0.3% versus +0.3% m/m expected while in Germany, factory orders contracted by 1.9% in December versus -1.0% m/m expected.
Against this backdrop, the FTSE 100 in London adds 0.09% to 6,509, Italy’s FTSE MIB recovers by 1.05 percent to 23,139, France’s CAC 40 is up by 0.80% to 5,653, while the German DAX 30 rises by 0.03% to 14,064. US stock index futures have settled on positive territory ahead of US job market data. As a reminder, ADP private job growth surprised well to the upside with a 174,000 rise while ISM manufacturing employment rose modestly from 51.7 to 52.6. As such, there is the prospect of some upside surprise in today’s NFP report.
In currencies, the dollar retreated marginally on Friday following the recent rally as traders proceeded to some profit-taking as the USD index climbed to two-month highs despite upbeat risk sentiment that took global stocks to all-time highs. The greenback could stay under some pressure in the short term but will likely regain the upside bias eventually as the US economic recovery looks more robust as compared to other countries.
As such, EURUSD slipped to fresh two-month lows around 1.1950 where the 100-DMA that has acted as support and thus triggered a local bounce. The pair was last seen trading around 1.1980, struggling to regain the 1.2000 psychological level that now represents the immediate resistance. Better-than-expected US employment data could bring the common currency back under the selling pressure later in the day, so the mentioned moving average remains in market focus as a break below it would trigger another plunge in the euro.
In other markets, oil prices rallied to fresh one-year highs around $59.70 in recent trading, now threatening the $60 psychological resistance that could attract some profit-taking if Brent doesn’t receive an extra bullish impetus in the short term. On the positive side, oil is supported by a weaker dollar and upbeat risk sentiment across the markets. Later today, Baker Hughes data could set the tone for Brent ahead of the weekend.
Nathan Lambert, Head of Global FX Analytical Department