Following mixed trading in Asia where tensions between China and the U.S. weighed on market sentiment, European equities were trading higher on Tuesday, as investors await the start of the U.S. Federal Reserve’s latest monetary policy meeting. The central bank is not expected to take any action, however, there will be close attention to comments on the Fed’s tapering plans. The statement is set to include updated forecasts as well. The dot plot is expected to point to an interest-rate increase in 2023, while the regulator is unlikely to signal a scaling back of bond purchases until later this year.
Back in Europe, fresh data showed that the German final CPI rose 0.5% MoM and 2.5% YoY in May. However, as the results came in line with expectations, the report failed to affect investor sentiment. Eurozone’s trade balance came in at 9.4 billion euros in April versus 15.0 billion euros expected. French final inflation came in at 1.8%.
Meanwhile, the US and the EU said to reach a deal to resolve Boeing-Airbus dispute. as a reminder, the tariffs related were put on hold until 11 July. In his latest comments, the ECB policymaker, Olli Rehn, said that there are no signs of a rise in broader price pressures while accommodative financing conditions are key to support the European economy. He also noted that PEPP will be conducted in a flexible manner to help counteract disinflationary effects while the recent rise in inflation is due to one-off and temporary factors.
Against this backdrop, the UK FTSE 100 gains 0.23% to 7,163, Italy’s FTSE MIB sheds 0.40% to 25,654, France’s CAC 40 adds 0.48% to 6,648, while the German DAX 30 gains 0.65% 15,776. US stock index futures made modest gains in premarket trade.
In currencies, the dollar was steady on Tuesday as the 10-year Treasury yield pulled back under 1.5%. EUR/USD rebounded further from the 1.2090 region ahead of US retail sales data due later today. The euro so far advances for the second session in a row, facing resistance in the 1.2150 area. The pair was last seen trading just marginally higher for the day, off the mentioned highs. If the upcoming data out of the United States exceed expectations, the greenback could rally across the board and thus push the euro into negative territory.
Nathan Lambert, Head of Global FX Analytical Department