European stocks climbed marginally on Friday, with markets are quite steady and inactive ahead of Powell’s speech at Jackson Hole. The Italian banks are on the rise amid reports that Trump could buy some of the country’s debt. Meanwhile, Italy’s Salvini reiterated that his country could clash with EU on budget law. The German Q2 GDP came out in line with projections and thus hasn’t affected market sentiment. As such, Britain’s FTSE 100 gains just 0.18 per cent to 7,576, France’s CAC 40 adds 0.43 per cent to 5,442, while German DAX 30 rises by 0.18 per cent to 12,387. US stock index futures are trading slightly higher even as the US-China trade talks failed to bring any progress in the relations between the two countries.
The greenback is mostly on the defensive on Friday. The US currency failed to proceed with yesterday’s recovery, and the overall market activity remains subdued ahead of the Fed governor testament on the monetary policy. Apart from this, the greenback is pressured by a mildly positive risk sentiment as the lack of progress in talks with China hasn’t disappointed investors who didn’t bet on any breakthrough. The USD bulls cant’ regain control so far, after a massive sell-off this week, fuelled by Trump’s criticism of the Fed policy. Traders will continue to follow the trade developments as well as the economic data from the US. Next week, the US GDP and private consumption expenditures reports are due, along with other, less important data. The greenback could resume its move within a bullish trend should risk aversion resume or economic releases come in on a stronger side.
As for the EURUSD, the pair fails to get back above 1.16 so far. The dollar weakness is the key bullish driver for the price these days, while the single currency itself doesn’t have any catalysts or cues. So as soon as the dollar bulls regain control, the pair will resume its decline, with the 1.15 level is the key on the downside, ahead of the 20-DMA at 1.1530. The pound is in a recovery mode, but the impetus is limited and the price remains below the 1.29 threshold despite the buck is on the defensive. A no-deal Brexit risk continues to limit the pound’s upside potential, and only a significant progress in talks with the EU could spark a sustainable rally in the GBPUSD pair.
Brent crude oil continues the ascent, and even reached July 11 highs above the $76 handle. However, the bulls can’t confirm a break above this level so far as the trading activity is getting slower ahead of the weekend. This week, the market has received a decent support from the US data that showed the crude oil inventories declined substantially. Apart from that, traders continue to buy amid the upcoming sanctions on Iran as well as due to a relatively stable risk sentiment. The risk factor for the prices now is the substantial escalation of a trade war between the US and China that could fuel another massive wave of risk aversion. Besides, the potential resuming of a dollar rally could derail the bullish impetus in Brent. So far, the sentiment in commodities remains positive, but to proceed with the ascent, Brent needs to firmly get back above $76.
Gold prices have resumed the rise after yesterday’s decline. The yellow metal is finishing this trading week in the positive territory for the first time over the last seven weeks. So, the selling pressure is gradually weakening, but risks remain as the greenback may yet stage a rebound on strong fundamentals, trade-war developments, as well as the Fed’s hawkish policy. From the technical point of view, the metal needs to overcome the $1,200 threshold to continue the rise from long-term lows and escape another sell-off in the short- and medium-term.
Nathan Lambert, Head of Global FX Analytical Department