A little more than a week left before the deadline for an agreement with China, with investors continue to focus on trade developments, expecting details and progress on this front. Chinese Vice Premier Liu He is scheduled to meet with Donald Trump at the White House later today. There are reports that the two sides started to resolve the major issues in their trade dispute. On the data front, signals of weakness continue to emerge. According to the Ifo survey, business morale in Germany declined for the sixth time in a row in February, to 98.5, the lowest level since December 2014. Against this backdrop, Britain’s FTSE 100 adds 0.60 per cent to 7,210, France’s CAC 40 is up 0.37% to 5,215, while German DAX 30 rises by 0.54 per cent to 11,485. US stock index futures point to a positive start for Wall Street amid the lingering optimism over US-China trade talks.
EURUSD extends the decline after another failed attempt to resume growth. The euro is capped by fresh signs of economic weakness in the euro zone as every dismal report makes investors push back their expectations of a rate hike by the ECB any time soon. At the same time, the ECB’s Novotny said today that it is not necessary to resume asset purchase program and If slowdown is driven by one-off factors, TLTROs may not be neededю He also mentioned that if lending weakens, special measures could make sense. The disappointing German Ifo data added to the worries in this context, while inflation numbers came in line with expectations and came as no surprise for the markets. Technically, the pair still needs to make a clear break above the 1.1350-1.1370 region in order to challenge the 100-DMA around the 1.14 figure.
Cable fell to four-day lows below the 1.30 handle after a consolidation around 1.3025-50. A break below the 1.3000 level may attract more sellers to the market, while Brexit-related rhetoric still not yet taking much shape ahead of next week's debate. Apart from Brexit uncertainty, the additional downside pressure on the pair comes from a steady dollar that turned positive against major currencies after some retreat earlier. The price also dived under the 200-DMA that now stands as the immediate resistance close to the psychological level.
USDJPY continues to shift between gains and losses. After a dip on Thursday, the pair is trading in the positive territory today but still lacks the impetus to break the key 111.00 barrier. Japan CPI was up by 0.2% YoY in January, below the previous 0.3%. The core index, excluding food and energy prices, rose to 0.4% from the previous 0.3%, in line with forecast. The results were in line with expectations but still far below BOJ's target, despite the aggressive stimulus measures. The longer the prices stay below the 111.00 level, the more becomes the risk of a pullback below the important 110.20 support.
Brent crude rose to fresh three-month highs at $67.80 on Friday. The market is driven by positive expectations related to trade talks between the US and China. Buyers also continue to emerge as concerns over global oversupply are abating further due to OPEС efforts, US sanctions on Iran and Venezuela as well as the potential supply disruptions in the hot regions. On the other hand, further rise in the US shale production that registered another record last week at 12 mln barrels, will likely cap a more aggressive rally in prices. Anyway, in the short term, the bulls seem to be ready to hold the barrel at elevated levels, though the risk of profit taking is getting higher as the prices are getting closer to the $70 barrier.Nathan Lambert, Head of Global FX Analytical Department