Despite weakness in Asia, European stocks opened higher on Friday but rise modestly amid a generally cautious tone in the global financial markets. The regional investors mostly shrug off the lingering concerns about the US-China trade tensions and slowing global growth. German and euro zone business surveys came in much weaker than expected, sending the euro down, which has partially supported DAX 30. As such, Italy’s FTSE MIB adds 0.45 per cent to 18,687, Britain’s FTSE 100 is flat around 6,959, France’s CAC 40 gains 0. 14 per cent to 4,944, while German DAX 30 rises by 0.15 per cent to 11,155. US stock index futures point to a weak open on Wall Street after yesterday’s holiday.
The greenback is trading mixed, today. The EURUSD pair turned negative on the day after the data showed that Germany and euro zone November preliminary PMIs came in lower than expected. Moreover, the composite indexes were the weakest in nearly four years. Dismal numbers confirm that the regional economy continues to slow. And this is not only a short-term bearish driver for the euro but a sign that the ECB will likely struggle to proceed to hiking rates next year. The Italy’s budget woes don’t add to optimism as well. So further weak data could prompt more selling in the single currency amid the monetary policy divergence. Technically, the pair could challenge the 1.13 figure as the price failed to break the 1.15 barrier and hold above 1.14. On the other hand, as the USD bulls have become more cautious, the immediate downside pressure may be limited if the greenback demand doesn’t reemerge any time soon.
GBPUSD turned red as well. The price didn’t dare to test the 1.29 mark and retreated to daily lows marginally above 1.28. Sterling is pressured by Brexit concerns that came in market focus again ahead of the EU Summit. The selling pressure returned after the former Brexit Minister Dominic Raab said the accord will be voted down by parliament. The uncertainty is really elevated at this stage and the recent optimism over the preliminary deal seems to be abating. Against this backdrop, the volatility will likely remain high next week, and selling on rallies seems to remain the safest strategy for now as more risks may be ahead. On the downside, the pair could attract demand on a potential break below 1.28.
USDJPY is under pressure for the second day in a row. The pair was rejected from the 113.00 barrier and continued to grind lower though the downside momentum is limited. Risk sentiment remains unstable, but investors don’t show an outright risk aversion now, so the yen demand is subdued. Should the sentiment continue to improve gradually, the dollar could target the 113.00 kevel again. On the other hand, as long as USDJPY stays below 113.60, bearish risks will continue to dominate. The greenback needs some hawkish signals from the Fed to resume the ascent and regain its attractiveness.
Brent continues to refresh lows on Friday, with the price extended the bearish path to January lows around $60,54. Now, the $60 support is at risk. The bearish pressure has intensified after the Saudi oil minister pointed to a slowing demand in coming month. The increasing US shale supply and massive sales by Wall Street banks added to the gloomу picture as well. Despite the oversold conditions, Brent could go even lower as the demand concerns prevail in the market, while OPEC members still don’t comment the Saudis’ initiative to cut production. The main threat for Brent now is the potential break below the $60 threshold. Once below, the barrel will get to a deeper stage within the bearish market.
Nathan Lambert, Head of Global FX Analytical Department