Investor focus is attuned to trade developments in Beijing, where the US officials are holding high-level negotiations with the Chinese colleagues. Market participants wait on signs of progress in relations between the two countries, and global stocks continue to perform well amid these expectations. European markets extend the gains, while positive quarterly reports add to the positive sentiment as well as strong Chinese trade data revealed earlier today. Airbus reported stronger-than-expected Q4 results, while Germany’s Gerresheimer highlighted that it was back on the growth path.
As such, Britain’s FTSE 100 adds 0.39 per cent to 7,218, France’s CAC 40 is up 0.66% to 5,107, while German DAX 30 rises by 0.26 per cent to 11,195. US stock index futures are climbing higher for a fourth day in a row amid the reports that White House is considering postponing higher tariffs on China for 60 days.
The dollar remains on the front foot, albeit the rally shows some signs of stalling. EURUSD is making some recovery attempts after a brief dip to fresh three-month lows in the 1.1250 region. The euro zone GDP data came in line with expectations, while German economy has disappointed. But the overall picture, including a rise in employment, opened the way for a mild rebound which is still capped by the 1.13 handle. In the short-term, the pair will likely remain under pressure due to the lingering uncertainty around Brexit, trade talks and the regional economy, as well as on the back of general dollar demand.
GBPUSD extends the downside momentum and is now challenging the 1.28 figure for the first time since mid-January. The catalyst for the latest sell-off were the signs that the UK government could lose the indicative vote. In particular, according to some sources, the ERG members are still seen abstaining and are not likely to support the government in the key vote on whether to allow May to continue to seek changes to the backstop within negotiations. The pound dived under the 100-DMA which is a negative signal from the technical point of view. Further selling pressure could bring the pair to the 1.2750 area.
USDJPY has been challenging the 111.00 resistance since yesterday. The price seems to be struggling ahead of the key 200-DMA around 111.50, which stirs the bulls. Besides, despite the widespread optimism traders remain somehow cautious on trade talks, which caps the downside pressure for the safe-haven Japanese yen. Technically, the pair needs to confirm a break above the mentioned psychological resistance, otherwise the risk of profit-taking will increase if some positive comments don’t emerge from Beijing on the near term.
Brent crude jumped to nearly three-month high of $64.80 on Thursday, with hopes of a breakthrough in trade talks continue to fuel demand for riskier assets including oil. The barrel is rallying for a third day in a row and could extend its gains to fresh highs above $65 should US and China report a progress in talks. Saudi Arabia’s plans to cut production over the deal volumes also provide support to the buyers. A daily close above the $64 figure will confirm an even more bullish tone in the energy markets.
Nathan Lambert, Head of Global FX Analytical Department