European stocks were lifted on Monday amid reports on a possible merger in the banking sector. German lender Commerzbank shares rose over 4 percent, following reports over a possible tie-up with Deutsche Bank, which also rose by more than 2 percent. According to the reports, the management board of Deutsche has agreed to hold talks with Commerzbank on the feasibility of a merger. It looks like the German Government, which owns 15 percent of Commerzbank, is backing a tie-up between the country's two largest lenders. Merger hopes lifted other banks’ shares. Against this backdrop, Britain’s FTSE 100 adds 0.50 per cent to 7,138, France’s CAC 40 is up 0.33% to 5,248, while German DAX 30 rises by 0.40 per cent to 11,503. US stock index futures are trading mixed ahead of the opening bell, with Dow futures are dragged down by a sharp drop in Boeing shares following the weekend crash of an Ethiopian Airlines 737 Max 8 jet.
The dollar is trading mostly under pressure today as traders continue to digest the weak US jobs report. Additionally, a better risk sentiment restrains the safe-haven USD demand. On the other hand, the EURUSD pair’s upside potential remains limited due to the lingering concerns over the economy. Fresh data confirmed that growth in the region is slowing down. German trade balance was worse than expected in January, while industrial production declined 0.8 percent versus +0.4 expected, after a rise by 0.8% in December. The pair rose to the 1.1260 area earlier on the day but failed to keep the momentum and retreated, trading marginally higher on the day. The next key event for EURUSD and the dollar pairs in general are Fed’s Powell testimony and US CPI data due on Tuesday. Stronger than expected figures could make the common currency give up gains and turn negative again.
GBPUSD dipped below the 200-DMA earlier in the day and refreshed the February 22 lows around 1.2960. The cable was rejected from lows later and regained the 1.30 figure. The pair continues to trade in a volatile manner, with risks are skewed to the downside ahead of Tuesday’s meaningful vote. There are reports that the UK PM Theresa May is losing support for her Brexit vote and is also facing increasing pressure to resign. The persistent Brexit uncertainties continue to dent sentiment surrounding the cable and makes traders refrain from big bets ahead of a major event. Against this backdrop, the pair’s upside potential will remain limited, both on the back of still relatively attractive dollar that derives some support from a pickup in the US Treasury bond yields.
By the way, the greenback failed to receive support from the US retail sales data. According to the official report, retail sales rose by 0.9% in January versus +0.2% expected after a decline by 2.1% in December. The advanced sales for January rose by 0.2% versus 0.0% estimate. However, the prior month was revised lower to -1.6% from -1.2%, which frustrated investors.
Brent crude oil continues to oscillate around the $66 figure, with the barrel is trading marginally higher on Monday. A relatively positive sentiment in the market is supported by hopes for prolonging the OPEC+ deal. However, the expectations were tempered recently as the Saudi Arabia's oil minister said it would be too early to change OPEC+ output policy at the group's meeting in April. Meanwhile, global outlook concerns remain in the spotlight. Today, the biggest Chinese auto industry association said that auto sales in the country fell 14% last month, which was took by investors as further sign of a slowdown. In the short-term, Brent will likely remain in the current range, awaiting fresh cues from the oil industry and other news.
Nathan Lambert, Head of Global FX Analytical Department