European stocks have accelerated the decline on Friday, with investor concerns keep rising ahead of another round of new US tariffs on China announced by Trump. The US President also rejected an offer from the EU to eliminate tariffs on cars and said it “was not good enough”, with the regional auto makers lead the losses today. Investors are also concerned by the ongoing crisis in the emerging market currency markets as the Argentina's peso, Turkey's lira as well as other currencies continue to fall. The upcoming Fitch decision on the Italy’s rating also makes markets nervous. Meanwhile, Canada government officials expressed doubt that NAFTA deal will be met today. As such, Britain’s FTSE 100 sheds 0.32 per cent to 7,491, France’s CAC 40 loses 1.12 per cent to 5,416, while German DAX 30 declines by 0.80 per cent to 12,394. US stock index futures set for weak open as global trade worries weigh.
The greenback recovers losses gradually against the European currencies while declining against the Japanese yen, in line with shifting market sentiment as risk-on trading continues to abate after Trump’s comments. The EURUSD pair is in the correction mode for a second day on Friday. Apart from the reemerging risk aversion, the single currency is under pressure ahead of the Fitch verdict on Italy’s ratings. Traders exit long EUR positions as there is a risk that the agency will downgrade the country that has faced budget issues. The price has declined from this month highs of 1.1733 registered earlier this week, and now the euro is on the way to challenging the 1.16 threshold which could become a resistance if market sentiment turns even worse and the Italian factor weighs later today. In the longer term, EURUSD could derail the 20-DMA at 1.1540 should the dollar demand comes back into the game amid the ongoing US-China trade war.
GBPUSD is on the defensive as well, though on the weekly charts the pair poised to close with solid gains. The pound failed to confirm a break above the 1.30 hurdle, which fuelled profit-taking amid the increasing buying pressure on the buck. The pair is losing ground ahead of Brexit meeting scheduled later today. Market participants hope to see some progress in talks but doubt that the key issues wil be resolved soon which coupled with risk-off environment caps upside attempts after the recent gains. Technically, there are no significant downside risks for the pair at this stage, but fundamentals could weigh. In a negative scenario, GBPUSD may lose the 1.2930 area, where the important local support level lies.
Brent crude oil faced some bids during the earlier correction down to $77.24 and got back to the opening levels in the daily charts. The price now targets the $78 barrier again, but the upside impetus from here looks limited as the prospect of another round in the trade war could intensify concerns over the Chinese oil demand. Meanwhile, the expectations of further market tightening amid the upcoming US sanctions on Iran continue to cushion prices in the medium term. In the coming days, as investor focus shifts to the US-China trade developments, the buying pressure on Brent could ebb, which may translate into a retreat to the $76 area.
Gold prices make fresh recovery attempts after yesterday’s decline. The yellow metal managed to close above the 20-DMA on Thursday, but the upside correction looks too timid and unsustainable to call a break above the $1,200 threshold which remains the key in the short term. Only above $1,216, the price may show a more reliable local rally and target more significant levels. Considering a growing probability of a more aggressive risk aversion and growing dollar demand, downside risks still prevail for gold. As such, the metal could finish the week below the $1,200 figure and stay under pressure.
Nathan Lambert, Head of Global FX Analytical Department