After a rise in the Asian markets, European stocks continue to climb higher on Friday, with mining, auto and technology shares lead the gains. By the way, the STOXX 600 set to register the best weekly rise in seven weeks as trade tensions have abated partially and the panic in the EM currency markets has abated. Nevertheless, the US-China trade conflict remains a source of concern for investors, though there are some hopes that the two countries will reach an agreement before the mid-term elections in November. As such, Britain’s FTSE 100 adds 0.31 per cent to 7,304, France’s CAC 40 gains 0.25 per cent to 5,341, while German DAX 30 rises by 0.23 per cent to 12,083. US stock index futures edge higher in early pre-market trade, and S&P looks set to register another record high at the end of the trading week.
Meanwhile, the greenback stays relatively weak after the yesterday’s sell-off on dismal inflation numbers. The EURUSD pair refreshed two-week highs around 1.1720 but is yet to confirm a break above the 1.17 threshold as it attracts profit-taking. As today’s the report showed, US retail sales came in at just 0.1%, much lower than 0.4% expected and than the previous result at 0.7%. The numbers are dismal across the board, including the sales ex-autos and the control group. Nevertheless, the revisions were quite good, which has partially compensated for weak fresh figures and thus capped the bearish pressure on the dollar. Still, August results are not a good sign for the American consumers.
USDJPY is making recovery attempts after a decline to intraday lows at 111.75. The pair has exceeded the opening levels after the retail sales report despite the weak numbers and set to challenge the 112.00 threshold once again. Interestingly, the pair stays afloat even as Abe said that he doesn’t think it’s alright for monetary easing to continue forever. The yen tried to catch a bid on these comments, but the momentum turned out short-lived as the risk-on sentiment caps the yen safe-haven demand. However, the prospects for a sustained break above 112.00 look timid as the risk sentiment could change at any moment should Trump publish a new ominous tweet, or China confirm its commitment to tit-for-tat measures in trade.
Crude oil prices are directionless on Friday, with traders decided to take a pause after a volatile week. As such, Brent is changing hands around the opening levels around $78.30 after failed attempts to challenge the $78 support which was tested yesterday. The general tone in the market remains positive in a wider picture, despite the recent rejection from May highs above $80, which was rather a technical correction amid profit-taking than a sign that the bullish impetus is abating. Despite the IEA report, which showed that the global supply reached a record 100 million barrels per day, prices stay afloat amid expectations of a significant decline in exports from Iran and Venezuela, along with further signs of a slower activity in the US, where crude oil production declined by 100K barrels last week. Should today’s Baker Hughes report point to another decline in the drilling activity, Brent may turn positive on the day, if the dollar fails to catch a bid ahead of the weekend.
Gold prices are still stuck between the 20-DMA and Bollinger bands that capped the upside potential on Thursday. The yellow metal managed to stay above the important $1,200 threshold which opened the way to another bullish attempt today. However, the price faces a rather strong resistance in the $1,215 region which capped the upside in August in many occasions. To challenge this area, the precious metal needs to see a more impressive dollar sell-off which could be sparked by signs of progress in US-China talks and weaker Fed rate hike expectations. For the time being, the immediate upside target for gold comes at $1,208, which is the intermediate resistance on the way to the mentioned level.
Nathan Lambert, Head of Global FX Analytical Department