European stock markets are trading in a mixed and muted manner on Wednesday, as investors express a cautious tone ahead of the Federal Reserve’s monetary policy decision, with the central bank is expected to cut interest rates by 25 basis points later today. On the trade front, there are reports that China is reluctant to commit to Trump’s demands that it makes significant purchases of American agricultural products, which brought additional uncertainty in the markets. Earlier, it was reported that the “phase one” interim deal may not be signed at a summit in Chile next month. As a result, trade-sensitive tech stocks are the biggest decliners among the major European shares. On Brexit front, the U.K. confirmed it will hold a general election on December 12 after Prime Minister Boris Johnson gained approval from Parliament.
Against this backdrop, UK’s FTSE 100 adds 0.02 per cent to 7307, Italy’s FTSE MIB loses 0.09 per cent to 22,659, France’s CAC 40 gains 0.23 per cent to 5,753, and German DAX 30 sheds 0.23 per cent to 12,910. Meanwhile, US stocks index futures point to mixed open as investors wait for the Federal Reserve’s decision on interest rates. Futures on the S& and the Nasdaq are little changed from the previous session, with Dow futures see marginal gains.
In currencies, the greenback turned higher across the board after a series of decent economic updates. The US economy has grown by 1.9% in the third quarter, above 1.6% expected. On a quarterly basis, the real GDP expanded 1.6% on a quarterly basis following a 2.6% rise in the previous quarter and fell short of expectation of 1.9%. Personal consumption rose 2.9% against 2.6% projected. Core PCE met expectations at 2.2%, while the deflator came out at 1.6%, below 1.9% expected.
As a result, the greenback spiked to daily highs against major counterparts, with EURUSD slipped back to the 100-hour MA around 1.11, down from the 100-DMA at 1.1126. In Europe, German CPI numbers came in better than expected and helped the common currency to trim intraday losses quickly. As such, EURUSD remained between the key moving averages in the hourly charts, with 1.11 figure managed to offer a local support for the pair. USDJPY turned green in the daily charts but failed to challenge the 109.00 handle as traders remain cautious ahead of the FOMC’s verdict on monetary policy.
In commodities, Brent crude has caught a small bid after relatively positive economic updates out of the US and Europe. The prices have settled above the $61 handle which remains in market focus in a muted pre-FOMC trading. In a wider picture, concerns over a possible delay in resolving the U.S.-China trade war has been weighing the prices on Wednesday, overshadowing a modest drop in U.S. crude inventories by 708K barrels in in the week ended Oct. 25. Later in the day, a rate cut by the Federal Reserve could support Brent marginally should Powell’s tone on future policy easing come as not a hawkish one.
Nathan Lambert, Head of Global FX Analytical Department