European stock markets are mixed-to-lower on Wednesday. In general, risk sentiment looks fairly positive ahead of the outcome of the Federal Reserve meeting and some signs of compromise on the Brexit front as the UK offered certain concessions in trade talks with the EU. According to the latest news, British Prime Minister Boris Johnson's spokesman said that the PM and his team continue to have conversations with lawmakers about the Internal Market Bill. Meanwhile, the UK's Secretary of State for Northern Ireland Brandon Lewis said that he was very optimistic about the trade negotiations with the EU and argued that the Internal Market Bill was not a distraction.
Elsewhere, in its interim economic outlook, the Organization for Economic Cooperation and Development now sees the world GDP at -4.5% in 2020, revised 1.5% higher from June. On the data front, the UK Consumer Prices Index came in at +0.2% in August when compared to +1.0% in July versus 0% expected while the core inflation gauge arrived at +0.9% YoY last month versus +1.8% previously versus +0.6% expected. Against this backdrop, the UK FTSE 100 index edges lower by 0.29% to 6,087, Italy’s FTSE MIB sheds 0.53 percent to 19,851, France’s CAC 40 declines by 0.12 percent to 5,061, while German DAX 30 sheds just 0.02% to 13,213. U.S. stock index futures edged higher ahead of the Fed’s policy decision and updated economic forecasts.
In currencies, the dollar keeps losing ground as traders continue to short the US currency ahead of FOMC decision. GBPUSD has been preserving its bullish momentum since the start of the week and climbed to the highest level in nearly a week at 1.2980. However, the 1.30 handle could act as short-term resistance. In a wider picture, the pound derives support from more upbeat Brexit headlines, a weaker dollar, and better-than-expected inflation data. If the Fed triggers another sell-off in the greenback later today, the pair could regain the 1.30 barrier that may attract some profit-taking, however.
Meanwhile, oil prices extend the rally on Wednesday, cheering another hurricane in the Gulf of Mexico that brings contraction in the shale oil output. Brent jumped above the $41 handle and registered nearly one-week highs around $41.60. The futures retreated a tad in recent trading but retain a decent bullish bias and could see another bullish attempt after a pause. Should the upcoming EIA weekly report surprise to the upside later today, Brent could climb to fresh local highs and even challenge $42 before sellers reemerge.
Nathan Lambert, Head of Global FX Analytical Department