A holiday in most parts of Europe is making for subdued trading on Monday despite the prevailing risk-on tone across the global financial markets at the start of the week. Inflation concerns continue to persist, capping gains in risky assets ahead of another round of Fed speakers due in the coming days, while the focus will be on the US PCE deflator readings for April on Friday.
Ahead of the weekend, investor sentiment improved after the European Central Bank President Christine Lagarde dismissed calls by some colleagues to consider tapering. On the negative side, Germany’s public health institute declared Britain and Northern Ireland a virus variant region, requiring anyone entering the country from the United Kingdom to quarantine for two weeks on arrival. Now, investor focus shifts to the EU’s special meeting of the European Council due later today.
Against this backdrop, the UK FTSE 100 gains 0.30% to 7,039, Italy’s FTSE MIB sheds 0.32% to 24,895, France’s CAC 40 is up by just 0.09% to 6,392, while the German DAX 30 rises by 0.44% to 15,437. US stock index futures slightly higher ahead of the opening bell on Wall Street.
In currencies, the dollar index has climbed back to the 90.00 area after a brief dip to 89.89. EURUSD slipped to the 1.2160 local support on Friday to turn marginally positive today as the greenback still looks relatively vulnerable. Now, the euro struggles to get back above the 1.2200 figure that represents the key target for bulls. On the downside, below the mentioned lows, the 1.2125 area will come into market focus. That’s where last week’s lows arrive. The index has climbed back to the 90.00 area after a brief dip to 89.89. furthermore, the daily RSI has turned directionless in neutral territory, suggesting weakening bullish bias.
Meanwhile, oil prices extend the rally since Friday, climbing to the 20-DMA around $67.70 in recent trading. Brent crude was driven higher amid rising worries about another above-normal hurricane season as Subtropical Storm Ana became the first named storm of this year's hurricane season on May 22. A weather system forming over the western Gulf of Mexico has a 40% chance of becoming a cyclone. On the other hand, gains in prices are limited by the expectation that Iran could add a million or more barrels per day of oil production later this summer.
Nathan Lambert, Head of Global FX Analytical Department