European stock markets opened marginally higher on Wednesday as investors shrugged off the reports that Trump, who leaves office on 20 January, has asked Congress to amend the virus relief bill. The $900-billion bill includes one-off $600 payments to most Americans, but Trump said the figure should be $2,000. Elsewhere, UK housing secretary, Robert Jenrick, said he was still reasonably optimistic about a Brexit deal, with both sides working through the serious issues as the clock continues to tick down to the end of the transition period on 31 December.
On the data front, Germany’s November import price index arrived at +0.5% versus +0.3% m/m expected. However, as this is a lagging data point, market reaction to the report was fairly muted, with traders being focused on other issues, including virus-related developments, US stimulus news, and the ongoing Brexit talks.
Against this backdrop, the UK FTSE 100 index sheds 0.09% to 6,440, Italy’s FTSE MIB adds 0.60 percent to 21,976, France’s CAC 40 is up by 0.51% to 5,494, while the German DAX 30 rises by 0.56% to 13,493. US stock index futures managed to erase early losses and turned slightly positive ahead of a series of economic updates out of the United States due later today.
In currencies, the dollar is back under the selling pressure as risk appetite has reemerged on Wednesday pre-holiday trading. As such, EURUSD bounced from the 1.2150 area and was flirting with the 1.2200 barriers at the time of writing. On the negative side for the common currency, as US stimulus measures are in doubt again, risk sentiment could deteriorate and send the safe-haven dollar north. On the other hand, markets are eagerly awaiting a Brexit trade deal breakthrough that could boost euro demand as well as push the sterling higher.
GBPUSD managed to recover above the 20-DMA in recent trading but is yet to confirm the latest recovery on a daily closing basis as the pressure could reemerge in case of negative Brexit headlines in the short term. The pair has exceeded the 1.3400 figure and now targets the 1.3450 region that represents the immediate resistance for the pound. Despite the current bullish bias, downside risks persist as some Brexit issues remain unresolved.
In commodities, oil prices derived support from the 20-DMA earlier in the day and turned slightly positive in recent trading, flirting with the $50 psychological level during the European hours. On the negative side, the coronavirus strain coupled with rising US crude oil inventories keeps a lid on gains in the market. So, should risk sentiment deteriorate again, Brent crude could resume its correction from March highs and threaten the $49 figure, especially if the upcoming EIA report reveals another rise in oil inventories.
Nathan Lambert, Head of Global FX Analytical Department.