After a positive dynamics in Asia, European stock markets show mixed trading. The dust settled after Trump decided to pull out the U.S. out of the Iran nuclear deal, but some geopolitical uncertainty remains, which is limiting investors’ optimism. On the positive side, the oil rally inspires energy shares across the globe, while in Europe particularly, Royal Bank of Scotland’s stocks set the bullish tone for banks after the reports the British bank will pay less than expected within settlement on selling of toxic mortgage-backed securities in 2005-2007. As such, FTSE 100 adds just 0.09 per cent to 7,669, France’s CAC 40 loses 0.05 per cent to 5,531, while German’s DAX 30 gains 0.34 per cent to 12,986. Meanwhile, Wall Street futures point to a bullish start of the upcoming session.
The greenback took a pause after yesterday’s rally to fresh highs amid a jump in the US Treasury yields above the key 3,00% level. On Thursday, the US currency retreats slightly against major rivals but remains within the bullish trend and looks ready to resume the ascent should any fresh driver emerge. The EURUSD pair has recovered slightly from end-2017 lows around 1.1820, but remains vulnerable to further losses as the fundamental picture in the euro area leaves mush to be desired and prevent the ECB from a more rapid exit from stimulus. In contrast, the Fed looks set for further tightening amid rising inflation expectations and the lowest unemployment since 2008. In the short term, the pair may recover some more and probably will try to challenge the 1.19 figure, but the bullish potential looks miserable amid dollar strength, and “sell on rally” strategy will likely prevent the euro from a more pronounced corrective rebound.
GBPUSD made some bullish attempts earlier in the day and even managed to touch one-week highs just above 1.36. But following the BoE meeting results, the pair retreated and turned red again. The regulator left the key interest rate unchanged as expected, but hinted at a “wait-and-see” approach in order to assess the upcoming economic data. All the MPC members agreed that future rate increases are to be gradual and limited in extent. During the press-conference, Mark Carney mentioned that the UK economy overall looks little changed, which looked like a rather optimistic signal, considering the dismal economic figures of late. After volatile short-term trading, sterling will try to chose a more distinct direction as market participants will digest the central bank’s message which looks rather mixed. The pound needs to regain the 1.36 level in order to shrug off the immediate bearish pressure, at least partially.
USDJPY is oscillating around short- term moving averages in the hourly chart, with the key resistance still comes at 110.00. Until the dollar makes a clear break above this threshold, the bullish impetus remains limited, and the price is vulnerable to a correction from three-month highs. Should we see a more risk-friendly environment down the road, chances for an upside break in the pair will increase. At this stage, some consolidation is more likely. The immediate support is at 109.30, where the 14-DMA lies.
Crude oil prices jumped to fresh November 2017 highs in Asia and stopped just below the $78 mark. In this area, Brent faces some offers and retreated to opening levels and now trying to keep above $77,40 area. The correction looks limited and rather technical one, but it may develop ahead of the weekend as bulls could take a pause after an impressive rally and proceed with partial profit taking in the short term. As for the longer term picture, Brent set for further ascent as traders will likely continue to price in a more aggressive tightening of the global market as new sanctions on Iranian oil exports loom. At this stage, the price needs to keep above the $77 mark in order to resume the rally.
Spot gold is trading in a positive territory after three days of decline. The price remains below the $1,320 mark since early May, and until the yellow metal clears this local resistance, the downside risks will prevail and recovery attempts will remain shallow. On the downside, the initial support comes at $1,310, a break below will open the way to $1,308. In the bigger picture, $1,300 remains the key level for the bears.
Nathan Lambert, Head of Global FX Analytical Departament