European stock markets are trading mostly lower on Thursday, though the selling pressure is rather timid. The sentiment is driven by earnings which show mixed results so far. As such, business software provider reported weaker than expected licenses growth in Q2, Publicis reported an unexpected drop in sales, while the Swiss ABB said its profit topped estimates in the second quarter. Meanwhile, concerns over the trade war remain, but have eased somehow lately, after Trump said that the US may prepare a trade deal with Mexico and Canada. As for trading policy with Europe, investors braced for European Commission President Juncker’s visit to Washington due next week, where he is expected to offer an important free trade deal. As such, Britain’s FTSE 100 adds 0.19 per cent to 7,691 amid further decline in the pound, France’s CAC 40 sheds 0.41 per cent to 5,425, while German DAX 30 loses 0.42 per cent to 12,711. US stock index futures suggest a consolidation with a negative bias.
It’s all about dollar strength in the currency markets, with all major rivals are nursing significant losses. The USD bulls continue to take a cue from the recent Powell’s positive comments on economy and monetary policy, while trade-war jitters give the additional support to the US currency. It may take some time before the greenback, which looks oversold in the short-term charts, attracts the selling pressure amid profit-taking. Driven by the buck, EURUSD dropped to July lows below the 1.16 level. Technically, the pair derailed the important intermediate support area and now it needs a daily close above this figure to avoid another sell-off. The short-term bearish risks prevail as long as the price is trading below the 20-DMA at 1.1670.
GBPUSD suffers hard looses for a third day in a row already. The pair slipped below the 1.30 handle which served as support yesterday. Apart from strong dollar, the pressure on the pound comes from ер alarming economic data, pointing to declining chances for a BoE rate hike next month. Amid slowing inflation and declining retail sales, the central bank may opt to put the hike on hold again, citing trade-war risks as well. Besides, the declining oil prices could put further pressure on consumer prices, which in turn may diminish the need for tightening amid Brexit uncertainty. From the technical point of view, there is a room for further losses in the short term, before the cheap pound will attract some buying interest and stages a corrective rebound.
Brent crude has resumed the downside movement after yesterday’s rebound by 1%. The price is attempting to hold above the $72 mark, a daily close below which will open the way to the recent three-month lows around $71.20 and to $70 eventually. The current situation in commodities shows that traders prefer to sell Brent on rallies, so the potential for a sustainable recovery in the short term is very low. The selling pressure has intensified after the EIA report showed the US crude oil output climbed by 100K bpd and reached 11 mln bpd for the first time. The unexpected sharp rise in crude oil inventories added to the negative tone in the market as well. Despite the immediate downside pressure could weaken in the nearest future, the market will need some significant drivers and catalysts to stage a convincing recovery.
Gold price continues to refresh one-year lows. The yellow metal failed to hold above the $1,220 level and dropped below the $1,215 as a result. Such a dynamics looks quite logical, considering the dollar rally gathered steam recently. As long as USD bulls dominate the swings in the currency markets, the precious metal will continue to feel the selling pressure despite the oversold conditions. The immediate target for nears now comes at $1,210. A break below will open the way to the $1,200 critical level.
Nathan Lambert, Head of Global FX Analytical Department