After a negative open, European stocks maintained a bearish bias during the session as virus-related concerns are overweighing the announcement of additional U.S. stimulus. As expected, U.S. President-elect Joe Biden overnight proposed a $1.9- trillion stimulus plan to support the world's largest economy.
In a sign that the coronavirus continues to hit European economies, the U.K. reported that its GDP fell 2.6% in November, back to 8.5% below the levels seen in February 2020. Meanwhile, Germany’s government is weighing up tougher lockdown while France announced Thursday it will bring forward its night curfew by two hours for at least a fortnight. Furthermore, a deepening political crisis in Italy adds to the negative tone in the regional markets as the former Prime Minister Matteo Renzi pulled his Italia Viva party out of the ruling coalition government.
Against this backdrop, the FTSE 100 in London sheds 0.37% to 6,776, Italy’s FTSE MIB adds 0.27 percent to 22,698, France’s CAC 40 is down by 0.63% to 5,645, while the German DAX 30 rises by 0.41% to 13,931. US stock index futures pointed lower ahead of US retail sales data due later today.
In currencies, the dollar is steady on Friday despite a dovish tone delivered by the Federal Reserve governor overnight. Even as the greenback resumed the recovery versus most counterparts, it will likely stay within a broader downtrend in the longer run, especially as traders express a justified skepticism about Bidens’ fiscal plan because the details of the fiscal package suggest the overall size will be whittled down before it gets the support required to get through the Senate.
As such, EURUSD continues to cling to one-month lows registered yesterday just above the 1.2100 figure, struggling to shift into a recovery mode, with the key 20-DMA continuing to act as resistance. As the sentiment remains tilted to the risk aversion, the common currency will likely stay on the defensive in the near term, especially after dovish comments from ECB officials regarding the appreciation of the exchange rate in recent weeks. The political crisis in Italy adding to the negative tone surrounding the euro along with the ongoing pandemic in the continent.
Nathan Lambert, Head of Global FX Analytical Department