European stocks traded mostly higher on Wednesday, with investor attention is focused on the state of Brexit talks this week. British Prime Minister Boris Johnson will head to Brussels later Wednesday to meet with European Commission President Ursula von der Leyen in a last-minute attempt to secure a trade deal after negotiators failed to make significant progress since the start of the week.
On the positive side, coronavirus vaccine optimism helped to lift market sentiment after the U.K. administered the first vaccines to the public on Tuesday while the FDA is holding an advisory meeting Thursday to review Pfizer's vaccine. Besides, progress continues on achieving a stimulus deal in the United States, as US Treasury secretary Steven Mnuchin presented a $916-billion bill to House speaker Nancy Pelosi. The bill was jointly brokered by the White House and Republican Senate majority leader Mitch McConnell.
On the data front, German exports increased by 0.8% month-on-month in October, from 2.3% in September while on the year, exports were still down by almost 7%. Imports increased by 0.3% from -0.1%. As a result, the seasonally-adjusted trade surplus narrowed to 19.4 billion euros in October.
Against this backdrop, the UK FTSE 100 index gains 0.50% to 6,591, Italy’s FTSE MIB loses 0.17 percent to 22,015, France’s CAC 40 is up by 0.26% to 5,574, while the German DAX 30 rises by 0.79% to 13,383. US stock index futures rose slightly early Wednesday, building on recent strength that’s pushed the major indexes to fresh all-time highs.
In currencies, the dollar is back under pressure nearly across the board as the risk-on tone prevails in stock markets. EURUSD faced local resistance around 1.2150 earlier in the day and trimmed intraday gains while staying in the green. As for the dollar itself, DXY has lost the short-lived upside traction and receded to the 90.70 area after the upside bias was limited around the 91.30 zone. The greenback continued to lose its appeal amid a combination of upbeat risk tone, the probability of extra US fiscal stimulus, and a potential Brexit deal. Of note, Brexit-related hopes sent the pound above the 1.3400 figure on Wednesday as the pair has once again bounced from the 20-DMA, today at 1.3320. If the upcoming negotiations succeed, the cable could rally to fresh highs above 1.3500 by the end of the day.
Meanwhile, Brent crude has settled above the $49 handle after marginal losses seen on Tuesday. The futures continue to cling to the upper end of the extended range as positive risk sentiment along with vaccine hopes keep the market afloat at this stage. Later in the day, the prices could be affected by the EIA weekly report. If the figures disappoint, Brent could retreat and finish the day lower while the broader picture will stay constructive for the time being.
Nathan Lambert, Head of Global FX Analytical Department