After a slightly negative tone at the open, European stock markets turned marginally positive on Friday, retaining a modest bullish bias during the session. Overnight, Treasury Secretary Steven Mnuchin announced plans to allow several of the Federal Reserve's emergency lending programs to expire on December 31. The announcement triggered a negative reaction in the markets but the pressure was limited amid lingering hopes for a vaccine and economic recovery. On the positive side, Senate Majority Leader Mitch McConnell has agreed to resume negotiations with congressional Democrats over a federal relief bill.
Against this backdrop, the UK FTSE 100 index gains 0.48% to 6,364, Italy’s FTSE MIB rises by 0.69 percent to 21,683, France’s CAC 40 is up by 0.53% to 5,503, while the German DAX 30 rises by 0.37% to 13,134. Meanwhile, US stock index futures pointed sharply lower in the early hours of Friday morning but started to gradually pare earlier losses in recent trading in a sign that risk mood is less pessimistic than during the morning session.
In currencies, the dollar is mixed after earlier losses and failed bullish attempts seen on Thursday. EURUSD has once again encountered the 1.1890 barrier and turned negative on the day, still struggling to regain the 1.1900 hurdle that continues to cap extra gains. In the short term, the prices will likely stay below this level and could extend the downside correction if dollar demand picks up. However, it looks like the pair will stay in a consolidative mode amid a lack of fresh drivers and muted trading activity in the markets ahead of the weekend.
Meanwhile, oil prices stay in a tight trading range, trying to reclaim the $44 figure as support on Friday. Brent crude still refrains from a break above the $45 key barrier as the futures lack directional impetus amid conflicting signals in the market. Rising coronavirus cases, concerns over demand recovery, and renewed political woes in the United States are limiting gains in oil prices. On the other hand, hopes for a vaccine and measures from OPEC+ help Brent to refrain from losses. In the immediate term, the prices need to stay above the $44 mark in order to continue bullish attempts and challenge $45 eventually.
Gold prices reversed north following three days of losses that brought the bullion close to the $1,850 key support. The precious metal bounced from nearly two-week lows and climbed to the $1,870 area that caps further upside attempts in the short term. in a wider picture, the bullish potential looks limited as long as the bullion remains below the $1,900 figure. In the near-term, the upside potential in the market is capped by a neutral stance towards risky assets.
Nathan Lambert, Head of Global FX Analytical Department