European markets are marginally higher on Monday, with investors saw a relief after the EU parliamentary elections, where pro-Europe parties preserved a majority, though eurosceptic opponents saw strong gains. The additional boost came from a confirmation of merger talks between Fiat Chrysler and Renault. Fiat said the joint organization would produce estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer. On the news, shares of Fiat rose 10%, while Renault surged 14%.
Against this backdrop, Italy’s FTSE MIB rallies 1.74 per cent to 20,485, France’s CAC 40 is up 0.23 percent to 5,328, while German DAX 30 rises by 0.48 per cent to 12,068. Markets in the U.K. are closed today due to a public holiday. US financial markets will be closed as well Monday in observance of Memorial Day.
The greenback is on the offensive against the majors today, in part within some corrective moves after steep declines in the second half of last week. EURUSD turned lower on the day after two days of gains but stays close to the 1.12 figure which remains in focus. The common currency failed to attract demand despite the parliamentary elections showed that pro-European groups still hold a clear majority.
In part, the euro came under pressure amid the declining yields in the German money market to fresh multi-year lows around -0.13%. A modest puck-up in dollar demand contributed to euro’s local weakness as well. Later in the week, traders will focus on German inflation data for May. In general, risk sentiment continues to drive the overall dynamics in the market. A daily closing below the 1.12 level will deteriorate the immediate technical outlook for EURUSD.
In commodities, Brent crude is oscillating in a limited range, with prices turned positive on the day after a dip towards daily lows around $67.26. However, the barrel still lacks momentum to challenge the $68 figure, a break of which is necessary for alleviating the recent bearish pressure. In general, the market looks more steady on Monday as concern over the US-China trade dispute counterbalance support from Middle East tensions and supply cuts by OPEC+.
A local bearish sign for the oil market is a fresh portion of weak Chinese data. Profits for industrial companies shrank last month in a further signal that the economy may be slowing. By the way, further escalation in the trade spat between Washington and Beijing could fuel concerns over global demand, which should cap any bullish attempts in the short- to medium term, unless the two countries report a progress in their negotiations.
Gold prices closed the week in the green, mainly due to a combination of weaker dollar and risk aversion. On Monday, the bullion struggles for direction and is mostly unchanged for the day around $1,285. The upside potential is still limited by the $1,290 level, which is standing on the way to the key $1,300 barrier. Should investors resume riskier assets sell-off any time soon, the precious metal could receive a fresh boost and challenge the $1,290 intermediate resistance.
Nathan Lambert, Head of Global FX Analytical Department