Following mixed trading in Asia, European stocks opened mostly lower on Monday as investors monitor developments in Turkey where President Recep Tayyip Erdogan unexpectedly replaced the central bank chief days after a sharp interest rate hike. The decision triggered a sharp sell-off in the Turkish lira, triggering massive risk aversion across the markets.
Elsewhere, Barclays revised lower its 2022 Eurozone GDP growth forecast, citing recent negative epidemiological developments and their potential scarring effect. The bank revised lower its growth projections for the region from 5.3% previously to 4.3% currently. The 2021 GDP growth forecast remained unchanged at 3.9%.
On the data front, Eurozone January’s current account balance came in at 30.5 billion euros versus 36.7 billion euros prior. Later today, market focus will shift to a speech from Powell and other Federal Reserve officials.
Against this backdrop, the FTSE 100 in London sheds 0.21% to 6,694, Italy’s FTSE MIB gains 0.20% to 24,246, France’s CAC 40 is down by 0.58% to 5,962, while the German DAX 30 is flat at 14,619. US stock index futures are mixed as investors refrain from buying at the start of the week.
In currencies, the dollar retreats marginally from early highs as risk sentiment has improved somehow. Still, the greenback remains steady, with upside risks persisting, especially amid rising concerns over a third coronavirus wave in Europe and elevated US Treasury yields. EURUSD bounced from lows in the 1.1870 area but struggles to make a decisive break above the 1.1900 figure that now represents the immediate hurdle for euro bulls. If the pair fails to overcome this barrier any time soon, the 100-DMA could come under pressure.
Elsewhere, oil prices are flirting with the $64 figure during the European trading, struggling to see a more decisive recovery as traders remain cautious amid concerns over oil demand recovery in Europe, rising drilling activity in the United States, and a strong dollar. Brent crude remains vulnerable following a plunge seen last Thursday when the futures lost over 7% in daily trading. Now, the prices need to regain the $65 figure in order to see a more sustained rebound and retarget the $70 barrier.
Nathan Lambert, Head of Global FX Analytical Department