European stock markets opened lower on Monday. The pre-Christmas trading is rather subdued, with regional markets will reopen on December 27. Partial US government shutdown increased the political uncertainty globally, in addition to global growth concerns. In a sign that the dramatic sell-off in the financial markets makes the governments worry, over the weekend, the Treasury Secretary Steven Mnuchin held calls with top US bankers following the recent equities sell-off and announced plans to convene a group of officials known as Plunge Protection Team. As such, German DAX 30 recovers by 0.21% to 10,633, Italy’s FTSE MIB sheds 0.97 per cent to 18,397, Britain’s FTSE 100 declines by 0.44 per cent to 6,691, while France’s CAC 40 loses 1.08 per cent to 4,643. US stock index futures climb as the greenback continues to lose ground nearly across the board.
The dollar is back under pressure after a short-lived positioning on Friday. The US currency continues to lose шеф appeal as a safe haven due to a partial government shutdown, falling US bond yields, fears of economic slowdown, and Trump’s criticism of the Federal Reserve policy. At the same time, thin market liquidity conditions are already limiting the moves in the buck ahead of Christmas holidays. There are no ay major events in the economic calendar until Friday, when the US preleases its key employment report that could affect the short-term market sentiment towards the buck. However, as traders are now focused on growth and inflation, strong labor market numbers will hardly ease the current concerns and give a meaningful support to the dollar.
USDJPY dipped to early-September lows last week. After a slide to 110.80, the price is attempting to trim losses and get back above the 111.00 threshold. But as the US bond yields continues to trend lower, and yen’s safe-haven appeal is obviously stronger, the potential for a more robust corrective rebound will hardly take place in the days to come. Moreover, as investor concerns are getting more pronounced, the Japanese yen may further gain ground early next year as more signs of slowing global growth could emerge in January. In the short term, the pair could resume the bearish move and refresh the lows below 111.00, though some consolidation looks more likely.
Brent crude is flat around $54 after a dip to the $53 figure on Friday. Traders remain cautious against the backdrop of global concerns as well as amid signs of resuming in the rise of activity in the US shale oil fields. As such, Baker Hughes reported on Friday that the US drillers added oil rigs for the first time in three weeks, which could be a sign that the US crude oil production will resume growth in coming weeks despite the recent plunge in prices. Meanwhile, there are reports that OPEC+ could increase the size of its production cut should the current deal was not enough. However, the headlines failed to inspire the bulls as the possible shift in the deal could take place only in April. In the short term, Brent could settle in a rather limited range due to a lower trading activity globally, while the downside risks still prevail.
Gold prices resumed the ascent on Monday after a brief correction amid the Friday’s dollar rally. The precious metal managed to stay above the $1250 level and now targets the recent highs above $1265. The short term charts show that the safe-haven gold demand looks somehow subdued today as the greenback is under a limited downside pressure due to a lower market activity. Another factor that could cap the upside potential in bullion prices in the days to come is the positive expectations ahead of Friday’s US NFP employment report. In a wider picture, gold will likely proceed with its gradual rebound after a massive sell-off earlier in the year.
Nathan Lambert, Head of Global FX Analytical Department