European stocks show a mixed dynamics on Friday as the global investors’ optimism has abated by the end of the week. The regional markets also pulled down amid substantial losses in the consumer-goods sector. Britain’s shares trade in a more sustainable manner, still receiving support from weaker pound on the back of doubts that the Bank of England will push the hike button on May 10. As such, FTSE 100 adds 0.30 per cent to 7,350, France’s CAC 40 rises by 0.16 per cent to 5,400, while German’s DAX 30 sheds 0.25 per cent to 12,536. Wall Street stocks opened with losses amid a mixed picture in corporate earnings and fresh comments from Trump who blamed OPEC for “artificially high” oil prices.
The dollar regained a strong bullish momentum yesterday and continues its ascent against major rivals on Friday. One of the drivers behind the greenback’s rally is the rise in 10- year Treasury note yield above 2.90% for the first time since late February. EURUSD slipped below 1.23 and 11-day lows. The morning German data added to the euro’s bearishness. March PPI rose just 0.1 MoM and 1.9% YoY versus the expected 2.0%. The recent economic fundamentals signal that the ECB is to start hiking rates later than anticipated. The next significant risk event for the single currency is the upcoming ECB meeting next Thursday. There is a growing probability the central bank will take a “dovish” stance on the monetary policy. Therefore, the pair may continue to lose ground in the short term, with 1.2235 is mow in focus as this support area is expected to limit the downside pressure.
GBPUSD is on the way to register the largest weekly losses since October. The pound faced double pressure from strong dollar and weak UK fundamentals signaling the BoE may refrain from hiking in May. Following the dismal CPI, wages and retail sales data, the central bank Governor Mark Carney highlighted that a May rate rise is not a foregone conclusion. Following the “dovish” comments, market pricing dropped dramatically to below 50% from 85%. Next Friday, the first Q1 UK GDP estimate is out, and the results will set further tone for the pound in the context of BoE’s potential steps. GBPUSD is trading at fresh two-week lows, marginally above the 1.40 threshold. A loss of this support will open the way to 1.3960.
USDJPY probes late February highs around 107.80 amid a widespread dollar ascent. The pair continues its appreciation for a third day in a row and also finishing the fourth consecutive week with gains. Despite the recent global markets sell off and unstable greenback’s positions, the yen struggles to properly use its advantage as a safe haven currency because of the BoJ’s unwillingness to start winding down the stimulus while other global central banks are gradually walking towards the exit. From the technical point of view, the pair needs to climb above 107.90 in order to target a higher range.
Crude oil prices had to give up early gains and turn red as Trump tweeted that high crude prices “will not be accepted” and that the current prices were “artificially high”. The cartel was quick to respond to this criticism saying there is not such a thing as artificial prices. Meanwhile OPEC+ ministers are holding a meeting in Saudi Arabia today and have already reaffirmed their commitment to keep output limited. The exporters will hardly give any specific timeline for further extension of the deal today, so we don’t expect Brent to resume its rally in the short term. The prices are now probing daily lows below $73, with market participants also looking ahead to weekly data from Baker Hughes on the number of oil rigs in the US.
Spot gold turned lower yesterday, after failed attempts to regain the $1,355 level. On Friday, the yellow metal has dramatically accelerated its bearish move amid rising yields in the global bonds and rallying dollar. The price dived below the key intermediate support of $1,340, and now there is a growing risk of further retreat towards $1,333, should the greenback demand remain elevated. The nearest resistance is now at the $1,340 level which capped the upside on several occasions.
Nathan Lambert, Head of Global FX Analytical Departament