European equities opened lower on Thursday as investors continue to digest a gloomy outlook revealed in the Federal Reserve meeting minutes. The central bank also ruled on yield curve control, which supported the greenback. On the positive side, the Chinese commerce ministry announced that Washington and Beijing will be back around the negotiating table in the coming days, after scheduled talks last weekend had been canceled.
Elsewhere, the European Commission is close to an agreement on the coronavirus vaccine deal with CureVac on the purchase of 225 million doses of the firm's potential medicine, on behalf of all EU member states. On the data front, Eurozone June construction output growth slowed to +4.0% versus +27.9% m/m in the previous month.
Against this backdrop, the UK’s FTSE 100 sheds 1.21 percent to 6,038. Italy’s FTSE MIB edges lower by 1.27 percent to 19,801, France’s CAC 40 loses 1.27 percent to 4,909, while German DAX 30 declines by 1.11 percent to 12,833. U.S. stock index futures are on the defensive after yesterday’s retreat following the release of the FOMC meeting minutes.
In currencies, the dollar recovery has stalled on Thursday after a short-term bounce from long-term lows across the board. The greenback cheered the Fed’s decision to rule on yield curve control. As a result, EURUSD retreated to the 1.18 area earlier in the day and has settled around the opening levels since then. A sharp slowdown in construction output growth added to the negative picture surrounding the common currency. Anyway, the pair remains within a bullish trend despite the recent correction.
USDJPY climbed above the 106.00 handle yesterday but failed to extend the recovery and is threatening the 20-DMA again. A break below this moving average that arrives at 105.85 could send the dollar back to the 105.00 area that helped to cap the selling pressure on Wednesday. The pair’s upside potential is also limited amid the prevailing risk aversion which in turn supports the safe-haven yen demand.
Oil prices are marginally lower on the day after another failed attempt to extend the upside momentum above the $45 figure. The market was nearly unaffected by the EIA report that pointed to a crude oil inventory draw of 1.6 million barrels, while gasoline inventories were down 3.3 million barrels last week. on the positive side, Saudi Arabia’s oil minister said during the OPEC+ meeting that demand should bounce back to pre-pandemic levels in the fourth quarter. In the short-term, Brent will likely continue to oscillate around $45 in directionless trading.
Nathan Lambert, Head of Global FX Analytical Department