Easing growth concerns pushed European markets higher on Tuesday as positive economic reports have reassured investors. In Germany, the ZEW Economic Sentiment survey for April came in much higher than expected at 3.1%, as analysts were forecasting 1.9%. In the UK, ILO unemployment was slightly better than expected, coming in at 3.9% for February versus analyst consensus of 4%. Market participants are also relatively optimistic ahead of China’s gross domestic product data release due on Wednesday.
Against this backdrop, Britain’s FTSE 100 adds 0.49% to 7,473, France’s CAC 40 is up 0.06 percent to 5,512, while German DAX 30 adds 0.68% to 12,102. US stock index futures are slightly higher, as investors await further earnings reports.
EURUSD is nearly flat on the day, after bullish attempts were rejected above 1.13. The pair registered a daily low around 1.1280. Stronger-than-expected German data failed to lift the common currency and gave only a short-lived support to the pair. Earlier in the day, there were reports that the several ECB policymakers had raised doubts over projections for a growth rebound in H2 2019. Later, the media reported that the central bank had not discussed further rate cuts in its latest meeting, which brought some relief to the euro bulls. However, the pair still lacks the upside impetus despite a dismal dollar demand amid the risk-on environment. As such, EURUSD will likely continue to oscillate around the 1.13 figure in the short term, as traders await fresh catalysts.
Brent crude is making recovery attempts after a brief dip to a low of $70.76 that capped the downside pressure yesterday. The recent profit-taking was due to some concerns over OPEC that signaled it may boost crude output to fight for market share. In particular, there is a growing concern that Russia will not agree on extending production cuts. In general, the sentiment in the market remains bullish as traders start to worry about the potential supply shortage as a result of unrest in Libya, and US sanctions against Venezuela and Iran. In the short term, Brent needs to confirm a recovery above the $71 handle. Otherwise, the futures may retreat further before the rally resumes.
Gold prices are grinding lower for a fourth straight session. The downside pressure increased after a break below the $1,290 figure, with the prices registered two-week lows around $1,282. The sentiment surrounding the precious metal turned sour as the risk-on trades reemerged amid the US-China trade optimism and waning concerns over global growth. Further on, the Chinese GDP report will be in focus, with the disappointing figures could send the bullion higher. Also, investors will continue to closely monitor the ongoing earnings season in the US. Weaker-than-expected results may open the way for a recovery in gold prices. The immediate upside target now comes at $1,288, where the 100-DMA lies.
Nathan Lambert, Head of Global FX Analytical Department