European stocks opened marginally higher on Friday before turning mixed-to-lower in recent trading, with regional markets looking directionless ahead of the weekend, continuing to digest a hawkish pivot from the Federal Reserve. On the data front, May’s U.K. retail sales fell 1.4% month on month, falling short of a 1.6% rise expected. In Germany, the producer price index rose 1.5% month on month in May versus 0.7% expected. On an annual basis, the PPI was 7.2% against a projection of 6.4%.
Elsewhere, the EU officially lifted travel restrictions for US residents. Earlier in the day, the Bank of Japan kept its monetary policy settings unchanged, and, as widely expected, extended a deadline for its pandemic-relief programme beyond September by six months.
Against this backdrop, the UK FTSE 100 sheds 0.84% to 7,093, Italy’s FTSE MIB loses 0.06% to 25,556, France’s CAC 40 adds 0.20% to 6,679, while the German DAX 30 sheds 0.32% 15,678. US stock index futures inched fractionally higher in early premarket trade Friday.
In currencies, the USD index continued to push higher, advancing to fresh two-month highs around 92.00 as the Fed signaled intentions to hike rates at some point in late 2023. Against this backdrop, EURUSD slipped to fresh mid-April lows around 1.1885 before bouncing back above the 1.1900 handle in recent trading. Despite the latest bounce, the common currency remains vulnerable to fresh losses in the short term. still, the upbeat economic data out of Europe helped ease the selling pressure surrounding the euro. the euro will likely struggle to regain the 1.2000 figure in the coming days while the overall bullish trend remains intact. On the weekly charts, the pair is now below the 20-week simple moving average, suffering losses for the third week in a row. However, only a break below 1.1700 would derail a broader uptrend from May 2020.
In other markets, gold prices bounced on Friday following five consecutive days of losses. The bullion plunged to early-May lows around $1,767 yesterday before recovering to the 100-DMA in the $1,797 in recent trading. A decisive break above this moving average would pave the way towards the $1,800 figure. On the downside, the $1,770 area remains in market focus as long as the bullion stays below $1,800 while the key upside target arrives at the $1,900 handle last seen one week ago.
Nathan Lambert, Head of Global FX Analytical Department