Global stock markets are trading mostly lower Monday, as investors digest the strikes on the Syria over the weekend. Concerns over US-China trade relationships remain as well, while the standoff between Russia and US over Syria adds to market nervousness. On the other hand, there are no evident signs of a direct confrontation between Washington and Moscow, which somehow eases pressure on risky assets. Further on, investors will focus on Syrian and US-China trade issues as well as the potential countermeasures by Russia after imposing new sanctions against the country. For now, Britain’s FTSE 100 sheds 0.5 per cent, to 7,228, France’s CAC 40 loses just 0.02 per cent to 5,307 and German’s DAX 30 declines 0.07 per cent to 12,432. Wall Street stocks meanwhile may gain some support from first-quarter earnings growth.
The greenback is on the defensive against major currencies. The pressure hasn’t eased even after the US retail sales data release. March retail sales came at +0.6% versus +0.4% expected. The control group sales came at 0.4% versus 0.3% expected. However, the broader picture shows the dollar remains out of favor amid Trump’s hostile rhetoric. EURUSD pair jumped to highs above 1.2370 amid a fresh wave of selling pressure around the buck which was also hit by a fresh Trump’s twit where he accused Russia and China of currency devaluation. Euro is trading near the highs from last week around 1.24 and may test the psychological level, should the greenback continue to retreat in the short term.
GBPUSD meanwhile refreshed end-January highs above 1.43, trading around the 1.4330 region. The pair is now within striking distance from the key 1.4350 area. A break above will sent the pound to fresh tops, but in order to attract more bulls, the pair needs additional catalyst besides the USD weakness as the currency looks overbought at current levels. The downside pressure on the dollar may ease, should the Fed members hit the “hawkish” button this week. If the governors express concerns over the recent geopolitical and trade tensions, the buck will have to nurse further losses against major counterparts including the pound.
USDJPY is trading with a bearish bias amid the general dollar weakness as well as the lingering yen demand as the risk-off mode mainly persists in the global markets. The pair so far manages to keep above the 107.00 threshold, but should the selling pressure around the American currency intensify, this support will turn into resistance again. The downside pressure on the pair is partially limited due to recent remarks by the Bank of Japan Deputy Governor Wakatabe who said that raising rates prematurely would push Japan back to recession. The key to the upside is the 107.80 area which is unlikely to be challenged in the nearest future.
After a five-day rally, Brent crude is retreating, though the asset tends to attract dip buyers which signals strong market fundamentals. The global crude oil market is getting closer to rebalancing, which supports long-term bullish prospects for prices. And the Middle Eastern concerns give a local support to the market which has become more sensitive to geopolitical concerns recently. So, to resume the ascent, Brent needs further escalation in the Middle East. Otherwise, the market risks attracting a more pronounced profit taking. Today, Brent received local support around the $71 mark, a break of which will open the way to a deeper retreat to $70,40. Prices need to regain the $72 level in order to confirm the bullish tone.
Spot gold is treading water around $1,345 after a failed attempt to break above $1,348. The metal remains in the positive territory but looks vulnerable as the risk aversion is rather subdued for now. The key to the downside is the $1,340 level as below the asset may retest the $1,335 area should the global stock markets avoid another sell-off amid geopolitical tensions. The recently intensified pressure on the dollar helps the metal to remain afloat for now, but for a more pronounced and sustained bullish move, the precious metal needs to climb back above $1,350.
Nathan Lambert, Head of Global FX Analytical Departament