European stock markets are just marginally higher on Friday as investors hesitate after nixed economic data. The U.K. reported a 3.6% surge in July retail sales, a better than expected result. However, the report did little to lift British shares as market participants are focused on the Brexit theme. According to the recent reports, the EU's chief negotiator Michel Barnier admitted that a Brexit deal will not be easy to achieve. He also expressed disappointment by the lack of progress in negotiations, which capped the upside potential in stocks.
Meanwhile, the German manufacturing purchasing managers index arrived at 53.0 in August versus 52.5 expected and 51.0 previous, while services PMI fell to a two-month low level of 50.8 from 55.6 in July. In the Eurozone, the manufacturing PMI edged lower to 51.7 in August from 51.8 in July, while the services PMI fell to 50.1 in August versus 54.5 expected and 54.7 previously.
Against this backdrop, the UK’s FTSE 100 adds 0.35 percent to 6,003. Italy’s FTSE MIB edges higher by 0.26 percent to 19,819, France’s CAC 40 gains 0.28 percent to 4,924, while German DAX 30 rises by 0.38 percent to 12,878. U.S. stock index futures hesitate after a rally witnessed yesterday as investors are nervous ahead of the US PMIs.
In currencies, the dollar turned mixed on Friday after a sell-off witnessed yesterday. EURUSD edged lower after earlier bullish attempts were capped by the 1.1880 area. The pair retreated to the 1.18 handle that acts as the immediate support. A break below this level will mark further deterioration in the short-term technical picture for the common currency. Weaker-than-expected European PMIs coupled with the lingering geopolitical uncertainty helped to ease the downside pressure surrounding the greenback. The USD could extend intraday gains if the US PMIs surprise to the upside.
USDJPY remains under pressure despite the prevailing risk-on tone. The pair is now back below the 20-DMA that now arrives at 105.80. On the other hand, downside risks are limited as long as the prices stay above the 105.00 support. If risk sentiment improves later in the day, the dollar could trim losses but the overall trend will stay bearish anyway.
In commodities, oil prices have settled around $44.50 after failed attempts to regain the $45 key handle. The OPEC+ countries reassured the markets that it will strictly cut its total oil production in line with the deal. However, the statement did little to lift the prices as traders continue to keep a cautious tone due to the geopolitical uncertainty and worrisome economic data that hints at a weak recovery in energy demand. It looks like Brent will stay under pressure in the near term and could finish the week marginally lower.
Nathan Lambert, Head of Global FX Analytical Department