Geopolitical tensions, Brexit issues and Italy’s budget woes continue to drive investor sentiment globally. European stocks opened with losses on Thursday and continue to trade in the negative territory as market participants prefer to take profit amid a number of global risks. EU and UK negotiators have agreed on draft text of future ties post-Brexit. But other issues may still come from the EU27 members who are now to decide if they will accept the text before the summit that will take place over the weekend. Meanwhile, Italy is set to face disciplinary measures from the European Commission and could be fined. Italy’s FTSE MIB loses 0.25 per cent to 18,684, Britain’s FTSE 100 sheds 1.00 per cent to 6,979, France’s CAC 40 declines by 0.51 per cent to 4,950, while German DAX 30 loses 0.57 per cent to 11,179. US markets are closed today for a Thanksgiving day.
The dollar is back under pressure against major rivals after some mixed trading earlier in the day. Despite the prevailing risk aversion, the USD demand looks sluggish as traders are relatively optimistic about the European developments, though risks remain elevated. The pound jumped above 1.29 in a knee-jerk reaction to the reports that the negotiators have agreed on the draft text. Since then, GBPUSD has retreated partially but remains strongly in the positive territory. Brexit-related news remain in market focus and fresh headlines will set further direction for sterling across the board. The potential profit taking could bring the pound back below 1.28.
EURUSD is trading marginally higher. The pair continues to fight for the 1.14 barrier, though the impetus looks too unsustainable to bet on further ascent. Euro’s upside potential is restricted by Italy’s budget difficulties which are not expected to be resolved any time soon. On the other hand, the USD demand is subdued due to some concerns over further Fed tightening. So the current tone looks rather neutral but things could change quickly if the ECB, the Fed, or the EU sends some strong signals to the markets. Technically, the pair still needs to make a clear break above the 1.15 barrier to show a more sustainable ascent. On the downside, the 1.13 figure remains the key support in the short-term charts.
USDJPY turned negative after two days of gains and struggles to stay above the 113.00 hurdle after the pair faced a local resistance in the 113.20 area. As the risk aversion has intensified, the yen demand is getting more aggressive. On the other hand, as long as investors refrain from panic movements, the pair’s downside potential is limited. Only below 112.00, USD will send a clear bearish signal. As long as the price continues to cling to the 113.00 figure, there is a chance of resuming the upside move.
Brent crude resumed the decline after failed attempts to regain the $64 level. The US data showed that crude oil inventories rose 5 m barrels last week, the rig count declined by three, while production remained unchanged at 11.7 m barrels per day. Despite a relatively bullish statistics and oversold signals, crude oil prices still tend to grind lower as traders are more concerned over the possibility of OPEC+ agreement on production cuts. The market signals that id desperately needs fresh bullish signals from the cartel producers ahead of the summit in Vienna.
Gold prices are trending higher again on Thursday. The precious metal has settled around the two-week highs around $1,230, which is the immediate hurdle on the way to further upside move. The weaker dollar coupled with safe haven demand add to metal’s attractiveness. Citing the ongoing recovery, many market participants start to call a bottom in gold prices. But it doesn’t mean that the way north will be easy and smooth as dollar demand could yet reemerge ahead of the December Fed meeting. The immediate support comes at $1,225, while the key region comes at $1,218. As long as the yellow metal stays above this level, the upside risks prevail.
Nathan Lambert, Head of Global FX Analytical Department