Despite a strong rally on Wall Street seen overnight, Asian equities were mostly lower, setting the tone for their European counterparts, with most regional stocks trading in the negative territory on Wednesday. Treasury yields keep a little higher to start the session, making regional stocks struggling ahead of the 10-year Treasury auction due later today. The upcoming US February CPI data makes investors nervous as well.
Meanwhile, German health minister, Jens Spahn, said today that the country won't see 10 million vaccinations per week in April. Of note, in the week from 1-7 March, there were just fewer than 1.5 million vaccination doses administered in Germany. On the positive side, data showed China’s factory gate prices rose at the fastest pace since November 2018 in February.
Against this backdrop, the FTSE 100 in London sheds 0.42% to 6,701, Italy’s FTSE MIB adds 0.24 percent to 23,873, France’s CAC 40 is up by 0.21% to 5,937, while the German DAX 30 is 0.19% higher, at 14,464. US stock index futures turned red following a strong rally seen overnight.
In currencies, the resurgent bond yields coupled with a softer tone around the equity markets sent the safe-haven dollar higher across the board following a short-lived retreat witnessed on Tuesday. Later in the day, the US CPI report will play a key role in influencing the USD price dynamics. Investors expect the data to show that the CPI rose to 1.7% in February while the core CPI rose to 1.5%.
As such, EURUSD is back on the defensive on Wednesday, though was off intraday lows in recent trading. Still, the pair is trading below the 1.1900 handle and could see fresh losses if the US CPI data exceeds expectations. Meanwhile, on the upside, the immediate significant target arrives around 1.1960. As long as the common currency remains below this barrier, downside risks persist. In the immediate term, the pair needs to regain the 1.1900 figure in order to see a more robust recovery.
In commodities, Brent crude turned marginally positive in recent trading following a dip to $66.50 earlier in the day. Despite the local bounce, oil prices remain on the defensive these days, as corrective signals continue to emerge, especially as the API data pointed to a 13-million-barrel jump in US crude oil inventories last week. Now, traders shift their focus to the official release from the EIA. Bearish figures could add to the selling pressure surrounding Brent, with a stronger dollar capping recovery attempts as well.
Nathan Lambert, Head of Global FX Analytical Department