European stock markets are trading in a mixed manner on Friday, with trading activity is rather muted ahead of Powell’s speech and US NFP jobs data. In general, investors still focused on global trade developments after the US and China agreed to resume talks in early October. In Europe, markets continue to monitor political uncertainty in the UK. According to the latest reports, the UK opposition Labour party leader Corbyn will hold a conference call with opposition leaders later today to discuss plans to prevent a no-deal Brexit. Also, a court in London has backed the appeal by Gina Miller and John Major against the government's suspension of parliament.
On the data front, German industrial production dropped by 0.6% month-on-month in July from a slightly upwardly revised drop of 1.1% MoM in the previous month. On the year, industrial production was down by 4.2%. Meanwhile, final Eurozone GDP grew 1.2% versus +1.1% y/y second estimate. Household consumption grew by 0.2% on the quarter relatively to the 0.4% growth posted in January-March. The data show that the Euro area economy continues to struggle, albeit there are no outright signs of impeding recession.
Against this backdrop, UK’s FTSE 100 loses 0.06 per cent to 7266, Italy’s FTSE MIB declines by 0.08 per cent to 21,935, France’s CAC 40 gains 0.22 per cent to 5,605, while German DAX 30 adds 0.37 per cent to 12,171. US stock index futures are trading higher as investors look ahead to employment numbers due later today.
In currencies, major pairs have been stuck in relatively tight ranges, with EURUSD is oscillating above 1.10. The common currency barely reacted to the Eurozone GDP data as traders are cautious ahead of the key US jobs data. Yesterday, the ADP report showed that US private payrolls increased at their fastest pace in four months in August. As such, market participants expect the NFP figures could exceed expectations, with wages data will also be in focus. Strong numbers will give a lift to the greenback across the board as traders could express doubt in the Federal Reserve rate cut in September. In such scenario, EURUSD may come under renewed pressure, with the key intermediate support comes around 1.0960.
USDJPY extends gains for a third day in a row as risk on sentiment prevails. The pair jumped to early-August highs around 107.20 but failed to close above 107.00. Further dynamics in the pair depends not only on risk sentiment but also on the upcoming news from the US. Apart from employment data, traders will focus on the Powell’s speech. The Federal reserve governor could shed some light on the prospects of monetary policy in the US. A less dovish rhetoric than expected could lift the greenback across the board and push the pair above 107.20 with the initial target of 107.50.
Brent crude struggles to regain the $61 figure after a brief jump above $62 yesterday. The overall sentiment in the market looks rather positive but traders remain cautious as they fear another unexpected escalation in the US-China trade tensions despite the two countries agreed to resume talks. At the same time, as long as Brent holds above $60, the downside risks remain muted. Once above $62, the prices will need to challenge the $62.40 area.
Nathan Lambert, Head of Global FX Analytical Department