European stocks bounced higher amid a rebound in risk sentiment as Chinese officials have accepted an invitation from the US to talk trade in late August. Besides, the situation in Turkey has stabilized and the lira continued to rebound, which added to a mildly positive sentiment in the global markets. Nevertheless, investors are not getting swept up by the optimism and remain cautious as any bearish signal or headline could easily reverse the mood. As such, Britain’s FTSE 100 adds 0.73 per cent to 7,552, France’s CAC 40 recovers by just 0.49 per cent to 5,331, while German DAX 30 rises by 0.28 per cent to 12,196. US stock index futures point to gains on easing geopolitical concerns.
The dollar and the yen are lagging behind as a result of the improved risk sentiment. European currencies are trading in the green on the day, but the recovery impetus looks limited anyway as risk aversion could resume at any point and markets remain sensitive and fragile so far. EURUSD expended gains from a 14-month low of 1.13 to the 1.14 area, but still lacks momentum to challenge this local resistance as concerns over the Turkish crisis remain. Moreover, the selling pressure could resume in the short term as the single currency still looks attractive to sell on rallies and there is a risk event tomorrow, when the euro zone reveals its July CPI data. Signs of slowing inflation could negatively affect market expectations for the first rate hike by the ECB and push the euro lower. As such, bearish risks still prevail in the pair as long as the price stays below the 1.15 resistance.
GBPUSD failed to keep gains above the 1.27 figure and got back below the psychological level, threatening the over 13-month lows in the 1.2660 area reached on Wednesday. The UK retail sales data surpassed even the most optimistic estimates, coming in at 0.7% as compared to 0.2% anticipated. However, the report has fueled sterling demand only locally, and the impetus faded quickly as the pound bulls remain under control amid Brexit developments and a threat of a no-deal exit. The pair needs a daily close above the mentioned 1.27 figure to see some easing in the selling pressure. In general, the pound will likely remain on the defensive as the price fails to stage a sustainable recovery even as the greenback demand has eased.
USDJPY has been showing a rather directionless dynamics. The price attempts to regain ground after a dip to the 110.45 area earlier in the day. The 111.00 level remains in focus in the short term as a sustainable rebound above this figure will allow challenging the 111.20 area, where the 14- and 20-DMAs converge. However, the current risk-on mode is not enough to fuel a rally in the USD as traders refrain from aggressive yen selling. As such, the pair will likely continue to struggle direction in the nearest future.
Brent crude has settled mildly above the $71 level, in a recovery mode after yesterday’s plunge to April 10 low of $70,30. Recent sell-off was fuelled by a bearish EIA report that showed an unexpectedly dramatic increase in crude oil inventories despite record high refinery runs. Last week, the stockpiles jumped 6.8 million barrels, compared with market expectations for a decline of 2.5 million barrels. Distillate stockpiles rose by 3.6 million barrels, versus expectations for a 1 million-barrel rise. As traders have digested the release, the selling pressure has eased due to some hopes for easing the US-China trade tensions amid the looming negotiations between the two countries. A better risk tone has also added to the recovery attempts. However, Brent will hardly be able to accelerate the current corrective rebound much higher as the market participants need more clarity on the trade front.