European markets are rising on Thursday as investors shrugged off the weak China industrial production data that confirmed a slowdown in the economy, while rising oil prices and expectations on the next UK vote keep the markets elevated. Investors prepare for U.K. parliament’s Brexit vote on whether to extend the March 29 deadline. As a reminder, on Wednesday evening the parliament voted against the prospect of a no-deal Brexit, which was welcomed by investors.
As a result, European equities reached their highest level in five months today. In particular, Britain’s FTSE 100 adds 0.47 per cent to 7,192, France’s CAC 40 is up 0.67 per cent to 5,341, while German DAX 30 rises by 0.33 per cent to 11,610. US stock index futures are rising slightly, however the positive momentum is capped by the reports that Trump-Xi meeting is being pushed back.
EURUSD retreated from highs around 1.1340, down to the 1.13 area as the sentiment in the market seems to be worsening amid talks about a delay in the Trump-Xi Summit to at least April. The common currency got under the additional pressure after the German data showed that inflation in the country rose by less-than-expected in February, up by 0.4% MoM and by 1.5% YoY. Meanwhile, fresh US data came out mixed. Weekly unemployment claims were up to 229K for the week ended March 8, while import prices index exceeded expectations at 0.6% versus 0.3% expected. The greenback looks strong in general, which caps the euro recovery attempts at this stage. Should risk aversion reemerge, the pair will stay around the 1.13 handle.
After yesterday’s spike to the high of 1.3378, GBPUSD plunged on Thursday and seems to have found a local bottom around 1.32. The bullish spike fizzled out amid confusion over the duration of Article 50 extension – while Tusk said to push for longer extension, May is said to opt for short delay if deal approved by March 20. Then, the unconfirmed news that the DUP is considering to support the government's deal helped the pair to trim intraday losses. The volatility remains high ahead of another Brexit vote, this time on the extension of a deadline. On the downside, the immediate support comes at 1.32, while the resistance now comes at 1.33.
Brent crude trimmed intraday gains but turned mildly positive again, after a brief dip to $67.34 from the four-months highs above $68. The market is now supported by a number of bullish factors. In a wider picture, market concerns over global oversupply continue to abate. The ongoing supply cuts led by OPEC and by US sanctions against Venezuela and Iran fuel market optimism. Locally, an unexpected dip in US crude oil inventories and production also lifted prices. Besides, there are massive blackouts and supply shortages in Venezuela that disrupted oil production and exports. Against this backdrop, the barrel looks set for further gains in the near term despite the overbought conditions, but the bullish potential looks less robust now and traders could proceed to a partial profit taking ahead of the weekend.
Nathan Lambert, Head of Global FX Analytical Department