European equities opened marginally higher on Wednesday before turning mixed-to-lower in recent trading, with the main equity index holding off record highs amid a cautious tone among investors ahead of the outcome of the Federal Reserve meeting.
On the data front, Japan’s trade surplus jumped 49.6% in May, pointing to a slow recovery in exports. In China, retail sales rose 12.4% in May, missing expectations once again. Industrial production rose 8.8% from a year ago, less than the 9% growth forecast.
Elsewhere, the EU lifted travel restrictions for US residents today, adding to signs that the summer reopening for Europe is starting to progress in earnest. Meanwhile, in its latest forecasts for the German economy, the Ifo cut German growth forecast this year from 3.7% to 3.3%, citing supply bottlenecks, which in turn is also manifesting in higher price pressures. Meanwhile, ECB vice president, Luis de Guindos, said the central bank policy should normalize gradually, with prudence.
Against this backdrop, the UK FTSE 100 gains 0.06% to 7,177, Italy’s FTSE MIB adds just 0.05% to 25,750, France’s CAC 40 is flat at 6,639, while the German DAX 30 sheds 0.27% 15,687. US stock index futures little changed in anticipation of the Fed’s verdict.
The dollar has settled in tight trading ranges on Wednesday ahead of the Federal Reserve decision. If the central bank expresses a more hawkish tone on the outlook for its monetary policy, the greenback could get a lift across the board, sending the euro back under the 1.2100 figure. On Tuesday, EURUSD failed to challenge the 1.2150 intermediate resistance and has been directionless since then. A break below 1.2100 would pave the way towards 1.2060. However, the downside potential should be limited.
Meanwhile, oil prices extended the rally to $74.70 earlier in the day before retreating to the flat-line during the European hours. According to the API report, US oil inventories dropped by 8.5 million barrels in the week ended June 11 after dropping by over 2 million barrels during the previous week. Now, market focus shifts to the official report from the EIA due later today. The outcome of the Federal Reserve policy meeting could also affect oil prices through the dollar.
Nathan Lambert, Head of Global FX Analytical Department