European markets are extending gains on Thursday as investors continue to expect tightening measures from the major global central banks. On the other hand, disappointment over the collapse of Renault-Nissan's merger with Fiat-Chrysler caps the optimism in the regional markets. Shares of Fiat Chrysler Automobiles MV slipped 1.6 per cent after the Italian carmaker abandoned its $35 billion offer for Renault SA. Renault's shares slumped about 8 per cent. Now investors in Europe are awaiting the latest decision from the ECB. The central bank is expected to maintain guidance, on the likelihood of more stimulus. Meanwhile, Trump said China wants to make a deal, Mexico wants to make a deal badly.
Against this backdrop, the UK’s FTSE 100 adds 0.69 per cent to 7269, Italy’s FTSE MIB rises by 1.07 per cent to 20,370, France’s CAC 40 is up 0.65 percent to 5,326, while German DAX 30 adds 0.72 per cent to 12,066. US stock index futures rose after Trump reiterated that progress was being made in talks with Mexico even though more effort is needed from the country.
EURUSD is marginally higher after it was rejected from highs above 1.13 yesterday. The pair stays above the 1.12 figure but the downside risks remain ahead of the ECB meeting. Some traders expect Draghi to express a more cautious and dovish tone amid the rising risks for the regional economy from the ongoing trade wars. On the data front, euro zone final Q1 GDP confirmed the sluggishness in the economy. In particular, the economy expanded by 0.4% on quarter in the three months to March of 2019, matching the previous readout and the expectations. On an annualized basis, the GDP figure arrived at 1.2%, confirming the previous 1.2% reading and matching the expectations of 1.2%. Meanwhile, industrial orders in Germany came in higher than expected and provided some local support to the common currency.
USDJPY is back under pressure after a short-lived rebound yesterday. The pair slipped to lows around 108.00 and remains on the defensive despite risk sentiment has improved in the global financial markets. The recovery faded on a bounce to the 108.50 area, which confirms the unsustainable path for the greenback after the latest dovish hints from the Fed officials. The Japanese yen continues to derive support from a cautious stance by investors fearing further escalation in the trade wars. IN the short term, the pair could make fresh bullish attempts but the upside impetus still limited while bearish risks persist.
Brent crude is trading cautiously higher after a brief dip below the $60 threshold yesterday. The prices recovered marginally above $61 but are yet to confirm the modest breakthrough as the selling pressure could resume at any moment. Commodity traders continue to express fears over the potential slowing in the global demand as there are meaningful signs of easing in trade tensions. Besides, the US crude oil production registered a new record high of 12.4 million barrels per week and oil inventories jumped nearly 7 million barrels last week, which adds to the negative sentiment in the market. As such, the current rebound may provide short-lived, and the risk of a dip below the $60 barrier remains.
Nathan Lambert, Head of Global FX Analytical Department