European stock markets turned mixed after a positive start on Thursday as optimism over the potentially effective coronavirus treatment started to wane. Eurozone GDP contracted by a record 3.8% in the first quarter, which came as no surprise for investors, considering the severe impact from the coronavirus pandemic. In France, the GDP contracted by 5.8% in the first quarter, suggesting the economy has entered a technical recession. Now, investors shift focus to the latest monetary policy decision from the European Central Bank. As a reminder, during yesterday’s meeting, the Federal Reserve pledged not to lift interest rates until it was confident the economy had weathered the coronavirus shutdowns.
Against this backdrop, UK’s FTSE 100 sheds 0.63 percent to 6,076, Italy’s FTSE MIB loses 0.30 percent to 18,012. France’s CAC 40 gains 0.16 percent to 4,678, while German DAX 30 adds 0.09 percent to 11,117. U.S. stock index futures are pointing higher amid a series of stronger-than-expected earnings from the tech sector and the news about the potential coronavirus treatment.
In currencies, EURUSD failed to climb to 1.09 handle and retreated again but remains slightly higher in the daily charts. The common currency shrugged off weak economic data out of the Eurozone and continues its consolidation ahead of the ECB decision. It looks like the pair will remain in its familiar trading range for the time being. The upside momentum may accelerate should dollar demand continue to wane in the short term. US jobless claims and other economic updates will be in focus later in the day.
Elsewhere, crude oil prices extended the rally to the $26.50 area and could see more gains in the near term. Once above $27, Brent may retarget the $30 important hurdle as traders express optimism over the potential recovery in energy consumption. Also, the OPEC+ deal, as well as a weaker dollar, support the market. As a result of a two-day rally, oil prices turned positive in the weekly charts, but considering the lingering concerns in the market, Brent may encounter sellers on the current rally. U.S. Energy Information Administration data showed yesterday that crude inventories increased by 9 million barrels last week, which was well below the 10.6 million-barrel rise expected. Furthermore, U.S. gasoline stockpiles dropped by 3.7 million barrels from record highs.
Nathan Lambert, Head of Global FX Analytical Department