European stock markets struggle for direction on Friday as investors continue to digest the message from the ECB expects the Eurozone to suffer a smaller recession than it had feared. At the same time, the European Central Bank’s chief economist, Philip Lane warned over getting too complacent about a recovery in the region. Today, Lagarde noted that the economic recovery in the Eurozone is uneven, incomplete, and asymmetric, while the second wave of COVID adds to the uncertainty.
There are also concerns over a messy hard Brexit after the European Union told Britain it should urgently scrap a plan to break their divorce treaty. The European Commission said it will wait for the reaction of the United Kingdom by that deadline and will consider the next steps once they have reached that particular bridge.
Meanwhile, China's foreign ministry said today that it has adopted reciprocal restrictions on staff from the US embassy and consulates in the mainland and Hong Kong. On the data front, Data out of Germany showed consumer prices falling in line with forecasts, by 0.1%. The UK GDP release showed that the country’s economy expanded sharply in July, arriving at +6.6% versus +6.7% expected and +8.7% previous. Meanwhile, the index of services arrived at -8.1% 3M/3M in July versus -19.2% expected and -19.9% prior. Manufacturing output arrived at 6.3% MoM in July versus 5.0% expectations and 11.0% booked in June, while total industrial output came in at 5.2% vs. 4.0% expected and 9.3% last.
Against this backdrop, the UK FTSE 100 index edges higher by 0.18% to 6,014, Italy’s FTSE MIB sheds 0.14 percent to 19,793, France’s CAC 40 rises by just 0.12 percent to 5,029, while German DAX 30 is flat around 13,208. U.S. stock index futures indicate a bounce on Wall Street following four bearish sessions in a row.
In currencies, EURUSD is trading higher on Friday after yesterday’s short-term spike above 1.19. The pair is climbing higher for the third day in a row and could finish above the 1.1850 area if the selling pressure surrounding the greenback intensifies any time soon. The common currency could struggle to make further gains as risk sentiment remains unstable. USD index faded yesterday’s gains and focuses back on the 93.00 level. One below this handle, the price could extend losses to 92.70. It looks like the dollar will continue its consolidation in the short term.
Nathan Lambert, Head of Global FX Analytical Department