European markets are trading in a cautious manner, trending marginally higher on Thursday. The current sentiment in the regional markets is rather neutral that positive as investors continue to fear further signs of slowing growth. By the way, dismal manufacturing and services data from the Eurozone added to the gloomy picture. France’s services PMI fell to a five-year low, while Germany’s manufacturing activity entered the contraction territory at the level of 49.9 — the lowest since June 2013. Meanwhile, the ECB lest its rates unchanged and said that rates will remain at current levels at least through the summer. As the decision was expected and priced in by the markets, it failed to produce a significant reaction by investors. As such, Britain’s FTSE 100 loses 0.02 per cent to 6,841, France’s CAC 40 gains 0.68 per cent to 4873, while German DAX 30 rises by 0.43 per cent to 11,118. US stock index futures are trading marginally lower before the official open ahead of major earnings including Union Pacific, American Airlines Group, Southwest Air, Intel and others.
GBPUSD jumped to a highest level since early November earlier in the day but struggled to challenge the 1.31 figure and eased back marginally. The pair manages to stay above the 1.30 level that comes as the immediate support. As long as the price keeps above this threshold, the chances for another bull run are high. Talk of an extension of the March 29 Brexit deadline for the UK to leave the EU continue to support the cable as the threat of a no-deal exit is further abating. This factor will likely limit any bearish attempts down the road, while the current retreat is more of a technical correction ahead of the psychologically important level. Plus, the fact that the pair has broken the 1.30 handle plays into the still positive technical picture for the currency pair.
Brent crude is on the defensive again, after the attempts to break firmly above the 200-SMA in the hourly charts failed. The downside momentum looks limited however as traders closely monitor the developments in Venezuela. The US government told its energy companies it could impose sanctions on Venezuelan oil sector this week if the political situation there deteriorates further. Should Trump decide to tighten restrictions, Venezuelan oil supply will decline further, which could help OPEC+ in rebalancing the global market and thus support oil prices. In other news, OPEC Secretary-General Mohammad Barkindo said the will continue to cut production over the coming months. He also noted that the market has already started to respond positively to the OPEC+ measures. As for the bearish risks, further evidence of rising US shale oil production could further derail the momentum in prices. Otherwise, Brent may resume the ascent in the days to come should investor sentiment in the global financial markets remain neutral-to-positive.
Gold prices are trading lower for the second day in a row. The yellow metal struggles to regain the $1.290 figure since last week and fails to attract demand amid the mixed investor sentiment. On Thursday, the additional negative pressure on the bullion comes from the robust dollar demand. In the bigger picture however, gold may yet resume the rally after the pause. For this to happen, we need to see a fresh sell-off in riskier assets. Such a scenario may come true if investors push the ‘panic button’ amid fresh dismal economic data, signs of little progress in the US-China talks and other political risks. So in the short term, the precious metal will likely remain under a limited pressure, while in the medium term, it could attract buying interest at lower levels.
Nathan Lambert, Head of Global FX Analytical Department