European stocks were down in early trading on Thursday ahead of the Easter break but managed to recover later despite dismal economic data. The Eurozone’s flash estimate for composite PMI indicator for April came in at 51.3, a decline from 51.6 in March and below the consensus expectation of 51.8. The Manufacturing PMI rose to 47.8, though this is still remained in contractionary territory, while the service sector PMI fell back to 52.5 from 53.3 in March. So the preliminary figures showed that the economic stagnation was not yet over in the region. Meanwhile, the reports that the US and China could sign a trade deal as early as in late March or early June failed to significantly lift investor sentiment.
Britain’s FTSE 100 sheds 0.11% to 7,463, France’s CAC 40 is up 0.27 percent to 5,557, while German DAX 30 adds 0.49% to 12,212. US stock index futures are falling during the last trading day of the week, as Wall Street awaits the release of more earnings reports.
EURUSD turned aggressively lower after earlier attempts to get back above the 1.13 barrier. The pair slipped to the 1.1240 area after the disappointing economic reports from Germany and Eurozone. In Germany, Markit's purchasing managers' index for the manufacturing sector came out at 44.5 points for April, below 45 expected and just barely above 44.1 seen in March, pointing to a deep and ongoing contraction in the region’s largest economy. Another portion of dismal figures stoke fears of a deeper slowdown in the Eurozone economy and dented the euro appeal. Meanwhile, signs of a recovery in the dollar demand added to the negative pressure on the pair. A daily close below the 1.1280 region would signal further pressure ahead.
GBPUSD is losing ground for a third day in a row on Thursday, after the pair struggled to confirm a break above the 1.31 figure early in the week. The pound received support around the 1.30 level today but downside risks seem to be increasing as the prices are getting closer to the 200- and 100-DMAs at 1.2970 and 1.2950, respectively. The positive impact from upbeat UK retail sales data turned out to be short-lived. Despite Brexit uncertainty, total sales increased by 1.1 percent compared to February, when they rose 0.6 percent. Retail sales soared 6.7 percent in March compared to a year earlier in the best annual gain since October 2016. A pickup in the USD demand and mixed sentiment in the financial markets dragged the cable lower, along with the common currency. A break below the 1.30 threshold could send the pair to the above mentioned moving averages down the road.
In commodities, Brent crude resumed the upside move after failed bearish attempts at $71.20. Initially, prices were lower amid risk-off environment after the European data showed that the business activity in the manufacturing sector continued to contract in Germany and the Eurozone. The recovery was due to the Joint Organisations Data Initiative report that showed Saudi Arabia's crude oil exports in February dropped to 6.977 million. In general, the sentiment in the market remains bullish as concerns over supply shortage continue to reemerge against the backdrop of OPEC+ efforts, geopolitical concerns, and US sanctions against Iran and Venezuela.
Nathan Lambert, Head of Global FX Analytical Department