European stock markets are edging marginally higher on Monday, with investors cheering a fresh portion of supportive measures taken by the Chinese authorities in an effort to prop up the economy amid a spread of the coronavirus. The country’s central bank cut its medium-term lending rate and injected more liquidity into the financial system. There are no major economic data releases out of Europe, so investors continue to closely monitor further developments surrounding the virus outbreak.
Against this backdrop, the pan-European Stoxx 600 added 0.5% register a new record high, UK’s FTSE 100 sheds 0.06 per cent to 7,447, Italy’s FTSE MIB loses 0.005 per cent to 24,890, France’s CAC 40 is down 0.12 per cent to 6,085, while German DAX 30 adds 0.28 per cent to 13,783. U.S. markets are closed today for the President’s Day federal holiday. On Friday, Wall Street indexes closed little changed but remained positive on a weekly basis.
In currencies, the greenback remains resilient against the majors. EURUSD makes some recovery attempts but the bulls are still out of the game, with downside pressure persists after a dip to fresh long-term lows around 1.0825 on Friday. The common currency continues to struggle as risk sentiment remains cautious, Eurozone economic data come in on a weaker side, and dollar demand persists. As such, the is unlikely to get firmly back above the 1.09 handle any time soon. On the contrary, the prices may threaten the 1.08 level should the outlook for the European economy get even more cloudy in the days to come. On Tuesday, euro area and German ZEW survey will be in focus, and weak figures could cent the pair to fresh lows.
USDJPY meanwhile sees a timid upside bias below the 110.00 handle. the pair struggled to get back above the key handle despite dismal economic data out of Japan. Japan's economy shrank 6.3% in the fourth quarter, at the fastest rate in five years, fueling concerns that coronavirus outbreak will add to the pressure on the economy this quarter. If so, the country will officially fall into a technical recession. In the short term, the pair will likely remain in a familiar range due to an unstable risk environment. On the downside, the immediate support arrives at 109.70.
In commodities, Brent crude stays mildly positive on Monday following four days of gains in a row. The prices are now holding above the $57 figure as risk sentiment has improved somehow, mainly due to additional supportive steps taken by Chinese authorities. Still, as the futures struggle to extend the upside momentum, the bullish potential from here looks limited due to the remaining uncertainty surrounding the OPEC+ decision, with strong dollar adding to the issues in the oil market. Failure to make a clear break above the $57.50 local resistance may send Brent lower in the short term. the immediate support comes around $57.
Nathan Lambert, Head of Global FX Analytical Department