European equities are muted on Thursday as investors await the European Central Bank releasing its latest monetary policy decision. Market players are also awaiting May’s US inflation report, which may provide clues on the monetary policy outlook. The US CPI is forecast to rise to 4.7% from a year earlier, up from 4.2% in April. The European Central Bank is forecast to leave its policies unchanged today, but there is an open question about the current pace of buying. The central bank is expected to avoid an unwanted tightening of financial conditions. The bank will also update its quarterly staff projections for inflation and growth.
Elsewhere, European Commission President Ursula von der Leyen said earlier today that more than 50% of the EU adult population has received one vaccine dose. She also noted that more than 100 million Europeans have been fully vaccinated, adding to signs that the vaccine rollout in the region has gathered pace in recent weeks. Meanwhile, U.K. Prime Minister Boris Johnson will meet his U.S. counterpart Joe Biden later today ahead of the start of the Group of Seven summit in Cornwall that begins on Friday.
Against this backdrop, the UK FTSE 100 gains 0.39% to 7,108, Italy’s FTSE MIB loses 0.27% to 25,673, France’s CAC 40 sheds 0.18% to 6,551, while the German DAX 30 gains just 0.03% 15,586. US stock index futures mixed as investors await key inflation report.
In currencies, the USD index advanced to three-day highs above the 90.20 figure as yields of the US 10-year note looking to regain 1.50%. Still, cautiousness prevails among traders ahead of key data releases. EURUSD derives support from the 1.2150 area while trading below the 20-DMA following yesterday’s rejection from the 1.2200 area. If the ECB delivers a dovish tone, and US inflation exceeds expectations, the selling pressure surrounding the common currency would intensify later in the day.
Oil prices regained bullish impetus following a short-lived pullback seen after the EIA data. The Energy Information Administration reported on Wednesday that U.S. crude inventories fell by 5.2 million barrels for the week ended June 4. The EIA, however, also reported that gasoline supply climbed by 7 million barrels, while distillate stockpiles rose by 4.4 million barrels for the week. Earlier in the day, Brent crude managed to hold above $71.50 to regain the $72 figure during the European hours. Another retreat could be seen if the greenback rallies after CPI data.
Nathan Lambert, Head of Global FX Analytical Department