European stocks are mostly higher on Monday as investors continue to cheer further reopening from pandemic shutdowns, with positive business sentiment survey out of Germany adding to the upbeat tone in the regional markets. Ifo Institute reported that German business sentiment rose in May, beating forecasts as business expectations improved considerably. The business climate index came in at 79.5 points from a downwardly revised 74.2 points in April. At the same time, the survey showed that many companies were still pessimistic about their business. As a reminder, U.K. markets are closed today for the spring bank holiday. Against this backdrop, Italy’s FTSE MIB edges higher by 2.08 percent to 17,442, France’s CAC 40 rises by 1.32 percent to 4,503, while German DAX 30 gains 1.83 percent to 11,277. U.S. stock markets are closed today for Memorial Day.
In currencies, the euro turned marginally higher on the day after a brief dip to one-week lows around 1.0870. EURUSD has settled around 1.09 and struggles to make a decisive break above this level despite fairly upbeat economic updates out of Germany and positive risk sentiment in the global financial markets. In the short term, the common currency needs to hold above the important 50-DMA in order to avoid another sell-off. On the negative side, the German labor agency said it expects Germany to post a budget deficit of €30.5 billion this year due to the coronavirus pandemic. For now, it looks like further consolidation is on the cards for the common currency.
Meanwhile, GBPUSD is flat on the day, remaining capped by the 50-DMA. Last week, the pair made several recovery attempts but stayed mostly offered due to dollar strength. In a wider picture, the cable is still weighed by the political uncertainty and the prospect of a deep recession. The pair now needs to overcome the 1.22 resistance in order to reclaim the above-mentioned moving average that comes around 1.2270.
Oil prices are slightly up on the day after Friday’s dip. Brent crude has settled above the $35 handle but struggles to overcome the $36 barrier despite risk-on tone in the financial markets. The oil market received local support from the Baker Hughes report that pointed to further decline in oil rig counts in the United States. In a wider picture, however, the upside potential in the futures remains limited as demand-related concerns remain in focus amid the coronavirus pandemic.
Nathan Lambert, Head of Global FX Analytical Department