Following the Dow Jones index exceeded the 30,000 mark for the first time ever, Asian stocks saw mixed dynamics on Wednesday while European stocks steadied after a slightly positive open. Markets remain afloat amid the lingering optimism over potential coronavirus vaccines and amid the increased certainty on the US political arena. On the negative side, the ECB warned in its latest financial stability review that the regional banks will not see profits return to pre-pandemic levels before 2022.
Against this backdrop, the UK FTSE 100 index sheds 0.29% to 6,413, Italy’s FTSE MIB rises by 0.11 percent to 22,170, France’s CAC 40 is down by 0.04% to 5,555, while the German DAX 30 declines by 0.14% to 13,274. Meanwhile, US stock index futures are easing slightly on the session in a sign of a more tepid mood globally, with investors turning more cautious ahead of economic updates out of the United States and the FOMC meeting minutes due later today.
In currencies, the dollar managed to trim intraday losses in recent trading as the risk-on tone has started to fade recently. As such, EURUSD corrected lower from the 1.1930 area and has settled just below the 1.1900 handle since then. In a wider picture, risk appetite trends continue to underpin the high-yielding common amid hopes regarding the delivery of a vaccine. In the short term, the pair needs to regain the 1.1900 figure and confirm the breakout on a daily closing basis in order to extend gains. However, EURUSD may need the additional catalyst to overcome the 1.1930 fairly strong resistance area.
Meanwhile, GBPUSD failed to preserve earlier intraday gains and saw a pullback after the European Commission president Ursula von der Leyen warned that a Brexit deal is far from certain, citing the disagreement over access to Britain's fishing waters that continues to prevent progress. As a result, the pound slipped to 1.3315 after a rejection from early-September highs in the 1.3400 area registered earlier in the week. If the pressure intensifies, and the pair fails to hold above the 1.3300 figure in the short term, the cable could retarget the 20-DMA, today at 1.3165.
In commodities, oil prices extended gains to $48.60 and retain a strong bullish tone on Wednesday despite the overbought conditions. However, considering the easing buying pressure in the global stock markets, further gains in Brent could be limited in the short term. Later today, the weekly EIA report could set further tone for the futures. Weaker-than-expected numbers may send the prices lower from the current levels that look attractive for profit-taking.
Nathan Lambert, Head of Global FX Analytical Department