European markets are trading mostly negative on Thursday, with bank stocks are leading the way lower. The Federal Reserve meeting gave contradictory signals to the markets. On the one hand, investors cheered the fact that the central bank abandoned further interest rate hikes this year. On the other hand, Fed’s fears over economic growth and US-China trade war made market participants anxious. As a result, the reduced growth outlook has put pressure on the regional stocks, while FTSE benefited from gains for mining and oil stocks, as well as from the pound weakness.
Against this backdrop, Britain’s FTSE 100 adds 0.31 percent to 7,313, France’s CAC 40 is down 0.39 percent to 5,361, while German DAX 30 sheds 0.83 percent to 11,507. US stock index futures are edging mostly lower in early pre-market trade, with Dow set to lose over 100 points as shares of Biogen plunged 26 percent after discontinuing trials for a drug aimed at treating Alzheimer's Disease.
As was widely expected, the Bank of England left the interest rates unchanged at 0.75% with a unanimous vote. The asset purchase facility remained at €435 billion as well. In the accompanying statement, the central bank said that the underlying inflation broadly on track with forecast, employment growth could now moderate significantly, Brexit could prompt policy moves in either direction, gradual, limited tightening still probably needed, while Brexit uncertainties continue to weigh on confidence, short-term economic activity.
In general, there was nothing new for the pound in the meeting but concerns over Brexit expressed by the monetary authorities capped the potential positive reaction in the currency. GBPUSD remained mostly unchanged, close to daily lows around the 1.31 figure and tried to trim intraday losses afterwards, clinging to the 1.3130 area.
EURUSD, meanwhile, turned negative on Thursday after yesterday’s spike towards 1.1450. The pair struggles to regain the upside momentum as the dollar post-FOMC pressure has eased already. Apart from the greenback’s recovery, the common currency is under pressure amid the lingering Brexit uncertainty. The UK officially requested a delay of Brexit until June 30th. Theresa May blamed Parliament for the postponement and asks them to approve the accord before the current Brexit deadline on March 29th. EU leaders will meet May in Brussels for a planned EU Summit, and it is unclear now if any decision will be taken.
Crude oil prices have settled around the $68 figure after a jump to fresh four-month highs around $68.50. Some uncertainty in the global financial markets seems to be weighing on Brent, along with technical factors as the prices have come close to the $70 important barrier. Earlier, the market was supported by the news from Saudi Arabia that is planning to reduce its output to 9.8 million bpd for March – over half a million bpd below its production level under the OPEC+ deal. On the other hand, traders understand that the announcement of a trade deal between the US and China remains the wildcard for oil prices in the medium term, which caps the bulls’ efforts.
Nathan Lambert, Head of Global FX Analytical Department