European stock markets are trading nearly unchanged on Tuesday in a shortened trading session due to the Christmas holidays. The remaining investors are still focused on the developments on the US-China trade front, with stocks were somehow supported earlier by the news that China will cut import tariffs on a wide range of goods from the United States. Starting January 1, China’s finance ministry will lower import tariffs on over 850 products in an effort to boost imports amid a slowing economy. Against this backdrop, UK’s FTSE 100 gains 0.09 per cent to 7630, Italy’s FTSE MIB loses 0.44 per cent to 23,898, France’s CAC 40 adds 0.05 per cent to 6,032, while German are already closed for a holiday.
In currencies, EURUSD turned negative again after failed attempts to break above the 1.11 handle. The pair was rejected from the levels just below this local resistance and has settled around the 100-DMA at 1.1060. in a wider picture, the euro remains stuck between the 100- and 200-DMAs, with bearish bias prevails at this stage. Considering the lack of drivers and news, the pair is just following the path of least resistance now, while dollar demand remains fairly subdued. Fundamentally, the increased chances of a hard-Brexit coupled with the limited progress in the US-China trade deal cap the upside attempts in the common currency.
During the recent sell-off, GBPUSD derived support from the 1.29 handle which if withstands the pressure from bears could serve as a point of the pair’s reversal. For the sterling to see a pickup in demand, Brexit related concerns should abate. So as long as no-deal worries persist, the cable will likely remain under pressure. On the upside, the pair needs to get back above the 1.30 handle which turned into a resistance after yesterday’s decline. Still, despite the second week of losses, GBPUSD is nearly flat in the monthly charts, as the pair saw strong gains in the first half of December.
In commodities, oil prices have settled around $65.50 after a brief dip below the $65 handle yesterday. The market has stabilized as the recent sell-off stalled fairly quickly and now is looks like Brent shows readiness to resume the upside move. In this context, the upcoming API report due later today will be important, as bearish figures could send the futures back below $65 in thin trading conditions. On the contrary, if the release surprises to the upside, the market will receive the needed boost to initiate a more sustained recovery.
Nathan Lambert, Head of Global FX Analytical Department