European stocks are mostly lower on Thursday as concerns over the global economy reemerged after the Organization for Economic Cooperation and Development said yesterday it downgraded almost every growth outlook for Group of 20 nations. In this context, investors will closely monitor the monthly US jobs report due on Friday. On the geopolitical front, investors continue to await details of a possible trade deal. It is reported that Trump is pressuring the US officials to strike a deal with Beijing soon. These expectations help the markets stay afloat though doubts and concerns remain. Against this backdrop, Britain’s FTSE 100 sheds 0.46 per cent to 7,163, France’s CAC 40 is down 0.49% to 5,263, while German DAX 30 declines by 0.59 per cent to 11,519. US stock index futures are trading lower on Thursday amid a weaker risk appetite across the globe and after a report that showed the country’s trade deficit widened to a 10-year high in February.
The EURUSD pair is making muted recovery attempts, with the 1.13 handle remains in traders’ focus on Thursday. After a dip towards the 1.1285 intermediate support, the common currency is trying to settle above the psychological level but the recovery momentum looks unconvincing as dollar looks relatively stable despite the demand soured after a surge earlier in the week. In a wider picture, the near-term technical outlook remains negative while below the resistance line at 1.1450. The euro zone data was mixed today, with Q4 final GDP came in at +1.1% vs +1.2% y/y expected, while the employment rate rose from 1.2% to 1.3% in the first quarter. A daily close above 1.13 will somehow improve the immediate technical picture for the pair, while for a more robust recovery, the common currency needs to get back above the 100-DMA at 1.1375.
GBPUSD is trading under pressure for a sixth day in a row already. Earlier in the week, the pair quickly derailed the 1.31 figure but since then, the price tries to stay above this important level. In general, the pound holds relatively steady on Thursday despite the reports that May’s Brexit deal looks set to face a defeat of up to 100 votes in the meaningful vote next week. By the way, the chances of delayed Brexit are rising as the deadline for the official departure of the UK from the European Union nears, so many traders are pricing in the probability in GBPUSD rally. The cable derives some support from the bank of England officials’ comments. According to them, small monetary policy tightening would be needed in case of smooth Brexit. In the short term, the pound will likely remain under some pressure around the 1.31 handle.
Brent crude extends the pullback from lows below the $65 figure, registered earlier in the week. The prices have settled above $66 and look set to challenge the $67 barrier. The sentiment in the energy markets seems to be improving despite another bearish report by the EIA. According to the official data, the US crude oil inventories increased by 7 million barrels last week, while the output remained at a record 12.1 million barrels per day, an increase of more than 2 million bpd since early 2018. However, the upside potential for Brent looks limited as the general risk sentiment in the global financial markets looks muted. At the same time, the barrel will likely remain afloat as long as investors await striking a trade deal between the US and China.
Gold prices reached fresh January 25 lows earlier in the day below $1,281 and since then have stabilized around the opening levels. The metal is directionless amid the flat USD index. Further direction in the precious metal prices will depend on the US jobs report due tomorrow. Should the data come on the bullish side, the greenback will rally across the board. In this scenario, the bullion could slip to fresh late-January lows below the $1,280 support area.
Nathan Lambert, Head of Global FX Analytical Department