On Friday, European stock markets trade in a mixed tone with a bearish bias. In addition to the global concerns over US-China trade relationships amid a lack of progress in talks, shares in Europe feel the additional pressure from uncertainty about the political future in Italy. Italy’s FTSE MIB Index declined over 1 per cent today, while the yield on 10-year Italian bonds rose 3 basis points. Meanwhile, Britain’s FTSE 100 down 0.07 per cent to 7,782, France’s CAC 40 adds 0.7 per cent to 5,626, while German’s DAX 30 loses 0.04 per cent to 13,108. Meanwhile, Wall Street futures eye higher start today.
EURUSD keeps trading lower on Friday, with the earlier attempts to stage a recovery failed in the 1.1820 area with the pair clipped back below the 1.18 figure. The dollar remains on the offensive, and the euro is nursing losses for the fifth consecutive week already. Against this backdrop, a corrective rebound would be welcomed amid the overbought conditions. However, high Treasury yields and the uncertain political landscape in Italy point to the potential another leg lower in the euro. Besides, the monetary policy divergence continues to fuel dollar demand as the Fed is the only major central bank that firmly follows the tightening path. EURUSD needs to recover above 1.1850 to ease the bearish pressure. Otherwise, the way to 1.17 will be opened.
GBPUSD is trading in a relatively tight range for the last three days. The pair is mostly oscillating around the 1.35 mark which remains the key area for further direction. A clear break above will partially ease the immediate downside pressure and will open the way to 1.3570. Overall, the pound remains vulnerable to further losses as the greenback still looks buoyant, and Brexit risks continue to press the British currency. In the medium term, the pair could break from the bearish trend should the UK economic data improve which will revive expectations over the BoE rate hike this year.
Meanwhile USDJPY is probing the 111.00 mark for the first time since late January. High Treasury yields amid growing inflation expectations in the US make the Japanese currency vulnerable, and lack of safe havens assets demand only adds to the negative tone around the yen. However, dollar bulls mat retreat for a while, as the 111.00 level will likely be rather firm to break it decisively.
Brent crude price stands below the key $80 mark on Friday, with bulls refrain from aggressive steps ahead of the weekend. From the technical point of view, the longer the price remains below the psychological figure, the higher the risk of a local or even major bearish correction as the barrel looks obviously overbought at these levels. There is no any relevant news in the market today, and after current consolidation, Brent could retreat a bit later in the day. A bearish catalyst may come from fresh weekly Baker Hughes data, should the report signal another week of rising drilling activity in the US. At that, the impact from the release will likely be limited, as the market largely ignores shale production data – traders are still focused on Iran and the threat of a global supply deficit.
As the USD index remains near five-month highs and the US Treasury yields stay at 7-year peaks, gold struggles to catch a bid and keeps bleeding on Friday. The yellow metal tried to trim weekly losses earlier in the day but failed to break above the $1,291 area and attracted sellers once again. Gold will likely remain in a deeply bearish trend for the time being as the dollar seems set for some more gains before a correction takes place. If the greenback receives fresh meaningful drivers in the coming days, the precious metal will have to slip below $1,285 and down to $1,280 or lower.
Nathan Lambert, Head of Global FX Analytical Departament