After a decline in Asian shares, dragged down by tech companies, European stock markets posted gains on Thursday as the EU-US trade tensions have eased as the two economies have agreed to work through differences on trade and to hold off to new tariffs. However, a limited discussion of autos leaves some degree of uncertainty and this is curbing investor optimism. As such, Britain’s FTSE 100 adds just 0.02 per cent to 7,648, France’s CAC 40 gains 0.30 per cent to 5,443, while German DAX 30 rallies by 1.06 per cent to 12,712. US stock index futures mostly decline amid the pre-market sell-off of Facebook shares after yesterday’s dive by over 20% due to weak earnings results. In addition, Twitter stocks decline by 4% after Trump criticized the social network for “shadow banning” Republicans.
The US dollar remains under a mild selling pressure against major rivals. At that, the euro turned red ahead of the ECB meeting. As expected, the central bank left the monetary policy on hold and failed to provoke a meaningful reaction from the single currency. The regulator also pledged to end QE by year end and confirmed that rates will be stationary through summer of 2019. As there was nothing new in the ECB meeting, the market focus now shifts to the US Q2 GDP report due tomorrow. The US President hinted this week that the figures will likely be stronger that many expect. Should the release confirm brilliant growth in the second quarter, the greenback will stage a rally across the board and wcoild send the euro to the 1.1620 area.
USDJPY develops its losing streak – the pair has been nursing losses for the seventh day in a row. On Thursday, the pair touched July 9 lows below 110.60, where has met some bids and recovered a bit. Despite the current bearish dynamics, further downside potential looks limited at this stage as the dollar could regain strength ahead of the weekend should the US Q2 GDP data come in better than expected. Besides, the recent yen’s rise was mainly due to speculations about the potential change in the Bank of Japan monetary policy, but chances for any adjustments during the upcoming central bank meeting early next week are quite low. Therefore, the Japanese currency could be disappointed and retreat after a rally within the bearish trend. As such, the greenback could get back above the 14- and 20-DMAs in the coming days and regain the 112.00 threshold.
Brent crude continues recovery attempts, pushing north for a fifth day in a row. The price has faced a rather stiff resistance of $75 and was rejected from a ten-day high of $75.30 earlier in the day. Traders were inspired by EIA data as the report confirmed further decline in US crude oil inventories (-6 mln barrels) as well as stagnation of production at the record 11 mln bpd over the last week. The overall support for the market comes from the easing trade tensions, reducing the risk of global demand disruption. The additional bullish driver for Brent is the escalating conflict between the US and Iran. Against this backdrop, the price could continue the ascent in the short term, though the risk of profit taking may rise ahead of the weekend. A daily close above $75 is needed for a confirmation of a more bullish sentiment in the industry.
Gold price has recovered partially yesterday, but has already resumed the downside move, after being rejected from $1,235, the local resistance area. Despite the dollar bulls remain on the sidelines, the yellow metal still can’t attract a more sustainable buying interest which could take the bullion above the key 100- and 200-DMAs coming just below the $1,300 handle. The immediate upside target now comes at $1,230, though the precious metal needs a daily close above the $1,235 area to confirm a local corrective rebound.
Nathan Lambert, Head of Global FX Analytical Department