European stocks are trading little changed on Wednesday as the trading activity is rather low ahead of the FOMC meeting minutes release. Nevertheless, major indices continue to trend higher, with most sectors in the positive territory as well. Investors are still focused on global trade developments. The officials from the U. and China resumed negotiations on Tuesday. The market behavior shows that global investors continue to hope that the world's two largest economies will soon secure a deal to end the trade war. The possible extension of the March 1 deadline for a deal also helps the equities to stay afloat.
As such, Britain’s FTSE 100 adds 0.44 per cent to 7,228, France’s CAC 40 is up 0.96% to 5,111, while German DAX 30 rises by 0.57 per cent to 11,153. US stock index futures are trading marginally higher as sentiment gradually recovers after a dismal retail sales report.
After the recent correction, the dollar seems to be resuming its rise though the impetus looks limited due to a cautious tone in the markets ahead of FOMC minutes. The release could trigger another round of dollar selling across the board should the monetary authorities highlight the need to take a pause in tightening, including balance sheet normalization. Another source of the potential weakness in the greenback is the hope of trade resolution between Washington and Beijing.
Against this backdrop, EURUSD has a chance to resume the recovery in the short term. The pair struggled to get back above the 1.1350 region earlier in the day and had to turn negative on the day as a result. Moreover, the common currency could further lose momentum should the incoming euro zone data add to concerns over the health of the regional economy. On Thursday, PMI data from Germany and euro area reports will set the direction to the currency pair. A break below 1.13 will deteriorate the immediate technical outlook for the euro, while a surge above 1.1350 is needed for a stronger momentum.
USDJPY extends gains today, with the pair continues to trade marginally below the 111.00 threshold. In a wider picture, the prices are still capped by the 200-DMA around 111.30. The dollar fails to surge above this resistance since late last year and will hardly be able to make a major breakthrough any time soon despite the risk-on sentiment prevails in the global financial markets.
Brent crude turned lower on Wednesday after the latest rally took the prices to fresh highs marginally below the $67 figure. The barrel is trying to stay above the 100-DMA below the $66 level, and the near term technical outlook looks a bit less robust as a result of a partial profit taking. At the same time, positive risk sentiment, easing oversupply concerns and risks for the dollar help Brent to stay afloat at this stage despite some downside bias which anyway looks natural amid some overbought signals.
Gold prices jumped to 10-day highs along with other precious metals. The bullion touched the $1,346.60 figure and retreated since then partially though remains elevated. In the short term, the yellow metal could receive a boost from the potential dollar weakness following the FOMC meeting minutes. Otherwise, gold could get ready for a local pullback, but the overall bullish bias will remain intact.
Nathan Lambert, Head of Global FX Analytical Department