European stocks are trading mostly lower on Thursday, with investors continue to digest the geopolitical developments in the world. Market participants are nervous about the conflict between India and Pakistan and relations between the US and North Korea. Also, investor optimism over the US-China trade deal started to wane after the US trade representative Robert Lighthizer said that he foresaw long-term hurdles ahead. A more downbeat sentiment is also due to poor economic data from China as factory activity declined d to a three-year low in February.
Against this backdrop, Britain’s FTSE 100 loses 0.47 per cent to 7,073, France’s CAC 40 is down 0.02% to 5,224, while German DAX 30 declines by 0.10 per cent to 11,475. US stock index futures are slightly lower as US-North Korea summit ended with no agreement.
EURUSD resumed the rally after a pullback yesterday. German CPI rose by 0.5% following a decline by 0.8% in January. The report that turned out not as bad as many investors feared helped to somehow ease concerns over the state of the euro zone economy. In this context, the next week’s ECB meeting may come as not painful for the common currency, though there is a risk that the central bank will revise its economic forecasts lower. EURUSD rose above the 1.14 figure and registered a three-week high around 1.1420. A break above this level will open the wat towards the 1.15 handle.
GBPUSD reached a high of 1.3350 yesterday and since then shows some signs of a mild bearish correction amid the overbought conditions. The cable is trying to cling to the 1.33 figure while traders continue to assess the prospects for Brexit delay which has been perceived as better than a no-deal outcome. This week, Theresa May confirmed that the parliament will have an opportunity to vote for a no-deal Brexit or Brexit extension if the revised deal is again gets rejected in two weeks. The pair needs to hold above the 1.3230 threshold in the near term in order not to lose its bullish steam and stay elevated. Fresh highs are possible in case of some progress towards Brexit delay.
USDJPY continues to switch between gains and losses. The pair is declining marginally on Thursday after a timid rise yesterday. In the weekly charts, the price is in the green territory but that could change if the risk aversion intensifies in the short term. Technically, the dollar needs to get back above the 200-DMA around 111.30 to get out from the familiar trading range. So far, the upside risks are low as geopolitical tensions persist and could rise, fueling the safe-haven yen demand.
Brent crude is trading mixed on Thursday, oscillating around the $66 figure. The barrel failed to challenge the $67 handle yesterday, with traders refrain from lifting prices to the recent tops. US commercial crude oil inventories decreased by 8.6 million barrels last week but the report failed to inspire investors as production increased to another record high of 12.1 million barrels per day. On the one hand, the market is still supported by US sanctions on Iran and Venezuela and OPEC’s intention to proceed with its output cuts. On the other hand, Brent5 will hardly be able to resume the rally in the short term amid the prevailing risk-off sentiment in the global financial markets.
Nathan Lambert, Head of Global FX Analytical Department