Wall Street closed lower, with the Dow dropping over 100 points and the Nasdaq snapping an 8-day winning streak as poor US economic data fuelled concerns over slowing economic growth.
Asian markets also fell overnight as deteriorating global economic growth and a lack of any fresh progress in US – China trade talks weighed on sentiment. With next week’s trade truce deadline fast approaching nerves in the market are starting to show through.
Right now there is no fresh news to keep sentiment elevated so investors are selling out ahead of the weekend.Hope of a bit more transparency out of Washington this week versus last week in Beijing has not panned out.
European futures are pointing to a softer start as they trace Wall Street and Asia lower. The FTSE looks set to be an exception, boosted by the weaker pound.
Pound awaits Brexit headlines from May’s EU visit
The pound is trading slightly lower at $1.3030, falling for its third consecutive session versus the dollar. The pound is still around 0.9% stronger than the dollar across the week. With no high impacting UK economic data to distract pound traders, attention will fall squarely on Brexit today and across the weekend. Theresa May is in Brussels, in talks with EU Commission President Jean-Claude Juncker.
However, Mr Juncker has made it clear that he is not optimistic that a no deal Brexit will be avoided. Theresa May will meet with EU leaders across the weekend in a last-ditch attempt to secure a Brexit deal that can be voted through Parliament.
Whilst there is no reported progress in Brexit talks, the outlook for the pound remains negative. The 200 sma of $1.30 has been offering immediate support. However, it is dubious whether this can hold. A break through $1.30 could open the door to a move back towards $1.2910.
Eurozone Data to send EUR back down through $1.13?
The euro has been steady versus the dollar over the past few sessions, even as data showed German manufacturing activity contracted further and as the ECB consider fresh stimulus to boost the stalling economy.
Today eurozone inflation figures could be the straw that breaks the camels back and pulls the euro lower. Inflation is expected to have declined a massive -1.1% month on month in January. On an annual basis, inflation is expected to have dropped to 1.4% from 1.6%. That is not the only bad news expected from the eurozone today. IFO figures are also expected to show that business sentiment is declining in Germany.
With evidence continuing to mount showing a stalling eurozone economy, traders will be watching closely to see what ECB President Draghi has to say when he speaks this afternoon. Whilst yesterday’s ECB minutes provided some clues as to the central banks position, today’s speech from Draghi will bring the market up to date with the ECB’s outlook.
The EUR/USD remains steady around $1.1330. Weakness in CPI , German GDP and IFO economic climate data could see the euro drop comfortably through $1.13.
Opening calls
FTSE to open 13 points higher at 7180
DAX to open 9 points lower at 11414
CAC to open 3 points higher at 5193