Equity markets in Europe have continued to chop in and out of positive territory for most of the past few days, as rising political uncertainty serves to keep investors in limbo, though the FTSE 250 has continued to outperform, closing at another record high yesterday.
So far this year equity markets across Europe, for all the ups and downs seen in the last few weeks, aren’t too far from where they started the year, as investors try to look through the fog of politics in France, Germany, the Netherlands, as well as the banking issues in Italy and the possibility of new elections there, as well as the perennial problem child of Greece. Is it any wonder that trying to find any sort of market direction is like wading through treacle?
US markets finished the day rather more mixed but only marginally below their record highs. US investors appear reluctant to throw in the towel on the Trump reflation trade quite yet, but there are signs of doubt as to whether it will actually arrive, so distracted does the new President appear to be with taking on his opponents.
Bond yields across Europe also slipped back somewhat, with German bund prices managing to rally quite sharply, while the recent sharp moves higher in French 10-year borrowing costs also eased, sliding back 10 basis points to 1%, though they still remain up 35bps year to date.
The rise of gold prices to their highest levels since early November has merely served to reinforce this cautious environment. oil prices did manage to find some support yesterday despite two massive weekly inventory builds from the American Petroleum Institute (API) and Energy Information Administration (EIA). An unexpected decline in gasoline inventories has helped stabilise oil prices and pull them off their lows, and this rebound looks to have buoyed shares in Asia and looks set to give us a positive open in Europe this morning.
The pound has continued to hold up well as the Brexit process took another step on the road to the triggering of Article 50 last night as the House of Commons finally kicked the Article 50 bill up to the House of Lords unamended, for their deliberations which are due to start on February 20th.
EURUSD – while below the 1.0720 area the risk of a move towards the 50 day MA at 1.0600 remains. A move through 1.0720 retargets the 1.0800 area.
GBPUSD – we need to see the pound break above 1.2570 to retarget a move towards the previous highs at 1.2700. The 50 day MA at 1.2410 remains a key support despite this week’s brief round trip to 1.2350.
EURGBP – currently holding below the 0.8570/80 area and while it does so the bias remains for a move towards the 0.8470 area. If we move back above the 0.8580 area then the previous peaks at the 0.8650 area come back into play.
USDJPY – continues to find support at the 111.60 area, however downside pressure for a move towards the 110.00 level remains while below the 113.00 area. The key resistance remains back up near the 114.30 level. To stabilise we need to get back above the 114.30 area or run the risk of a deeper move towards 110.00.
FTSE100 is expected to open 8 points higher at 7,196
DAX is expected to open 17 points higher at 11,560
CAC40 is expected to open 12 points higher at 4,778
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