After a mixed-to-lower open, European stock markets turned marginally positive on the day amid some progress in the EU-UK negotiations towards a post-Brexit deal, helping to overshadow concerns over rising COVID-19 cases and tighter restrictions. Meanwhile, Germany will tighten restrictions over Christmas, starting on Wednesday, the U.K. government said London would move into the toughest level of restrictions on Wednesday, and the Netherlands will enter a five-week lockdown. On the data front, the unemployment rate in the U.K. rose to 4.9% in the three months to October, with the number of people jobless climbing to 1.7 million.
Against this backdrop, the UK FTSE 100 index adds 0.14% to 6,540, Italy’s FTSE MIB gains 0.19 percent to 21,800, France’s CAC 40 is up by 0.41% to 5,550, while the German DAX 30 rises by 0.65% to 13,309. US stock index futures pointed higher ahead of the opening bell despite tougher measures in New York.
In currencies, earlier recovery attempts in the greenback were capped by some improvement in risk sentiment. As a result, the dollar came back under pressure nearly across the board. EURUSD stays elevated above 1.2100, having settled just below long-term highs in the 1.2180 area. If the selling pressure surrounding the USD intensifies any time soon, the 1.2200 figure could come into market focus. Now, traders shift their focus to the FOMC meeting that concludes on Wednesday. The common currency may derive additional support from the event if the central bank delivers a dovish tone.
USDJPY is around the flatline following an earlier rejection from the 20-DMA that continues to cap bullish attempts. As of writing, the pair was changing hands around 104.00, unchanged for the day. USDJPY struggles for direction as the dollar remains weak across the board while the safe-haven Japanese yen struggles amid positive risk sentiment. It looks like the pair will stay in a consolidative mode in the short term before deciding on further trajectory, with downside risks persisting further.
In commodities, Brent crude continues to cling to March highs while clinging to the $50 handle during the European hours. The oil market sentiment looks upbeat despite the IEA revised down its global demand forecast by 50,000 barrels per day in the latest monthly oil market report. The market failed to react to the downward revision to the demand outlook, keeping its range above $50, slightly higher on the day.
Nathan Lambert, Head of Global FX Analytical Department