European stock markets are slightly higher on Thursday as investors digest a market-friendly message from the Federal Reserve, as the central bank held steady as expected and signaled that rates would remain accommodative with no hikes expected in 2020. In Europe, the European Central Bank will soon announce its latest monetary policy decision, with Investors watching closely for hints on future policy decisions. In the UK, the second general election since Brexit referendum started, which makes investors somehow nervous. On the trade front, Trump is expected to meet with top trade advisers today to discuss the planned tariffs.
As for the data, Eurozone’s industrial production fell by 0.5% month-on month in October after a downwardly revised 0.1% contraction September. Year-on-year production fell by 2.2%, compared to a 1.8% decline in September. In fact, the decline was not a surprise after the disappointing report out of Germany. Meanwhile, the IFO institute affirmed 2020 German GDP growth forecast of 1.1% and said the recession is unlikely in the country.
Against this backdrop, UK’s FTSE 100 gains 0.50 per cent to 7252, Italy’s FTSE MIB adds 0.33 per cent to 23,232, France’s CAC 40 gains 0.07 per cent to 5,865, and German DAX 30 rises by 0.14 per cent to 13,165. U.S. stock index futures point to a slightly higher open as investors are cautiously monitoring trade developments, with three days to left before Washington imposes fresh tariffs on Chinese goods.
EURUSD rises for a fourth day in a row, now supported by a broad-based weakness in the dollar. The pair has settled at early-November highs marginally below the 200-DMA which serves as the key resistance now. However, the euro struggles to extend gains amid some recovery in the greenback after the recent sell-off. Positive outlook from German IFO supported the common currency as well as mostly positive risk sentiment across the markets as investors still hope that the US and China will avoid another escalation in their trade conflict.
USDJPY continues to consolidate in a limited range in the daily charts, with the pair struggling for a clear direction for a few sessions after a retreat from local highs around 109.70 last week. The dollar is now below the 200-DMA which is the nearest resistance around 108.80. Once above the 109.00 handle, the short-term technical picture will improve. Still, this scenario looks unlikely at this stage as investors prefer a cautious approach due to heightened uncertainty surrounding the US-China trade relations. Should risk sentiment turn sour again, the pair will get back below the 108.50 area.
In commodities, Brent crude continues to oscillate around the $64 figure, testing the 200-DMA which should open the way to last week’s highs marginally below $65. The market lacks the upside impetus because of the looming US tariffs against Chinese goods due to take effect on Sunday if Trump doesn’t postpone the decision. Against this backdrop, Brent will likely extend the current consolidation in the near term, with near-term risks are skewed to the downside despite the elevated levels.
Nathan Lambert, Head of Global FX Analytical Department