FTSE 100 -2 points at 7275
DAX -7 points at 11750
CAC -6 points at 4893
Euro Stoxx 50 -3 points at 3307
The G10 majors firmed against the US dollar, as the greenback partially gave back the post-Yellen gains. The pullback in the US dollar could be temporary as FOMC Chair Janet Yellen’s testimony revived the Federal Reserve (Fed) rate hike expectations significantly this week.
The trading volume on the US shares hit a two-week high; $7 billion shares were traded in New York yesterday. The Dow and the S&P 500 retreated for the first time after a seven-session winning streak. Perhaps, after such a strong rally, some traders found the timing appropriate to take profit. Yet with Donald Trump’s ‘phenomenal’ fiscal plans looming, the appetite in the US shares remain tight. The drawback could be limited.
The reflation trade being repositioned, we have seen some downward pressures coming through the Asian trading session. The rally in the Chinese H-shares lost steam. Hang Seng (-0.39%) and Shanghai’s Composite (-0.91%) traded lower
It has been a day of selling in Tokyo as well. Nikkei (-0.58%) and Topix (-0.42%) retreated on a stronger yen against the US dollar. The USD/JPY traded below the 114.00 mark on Friday, meanwhile the EUR/JPY held the ground above 120.00.
Gold extended gains to $1240, as the US 10-year yields failed to cross above 2.50% this week. Rising inflationary pressures in the US are attractive for macro funds for hedging purposes. Strengthening positive trend in gold is set to target the $1245/1250 offers. Gold is heading for its 7th weekly gain, Blackrock (NYSE:BLK) has also recommended gold as hedge against the equity volatility.
The euro is better bid. The EU officials said it is possible to reach a Greek deal by March. On the other hand, the European Central Bank (ECB) meeting minutes revealed that the bank would buy more bonds from heavily indebted peripheral and less from less indebted core countries, such as Germany and France. The doves remain in charge of the ECB’s Governing Council though, hinting that the asset purchases would last at least until December 2017, and there is little probability for an eventual tapering announcement anytime before September. The EUR/USD recovered to its 100-day moving average (1.0680). Clearing the 1.0680-resistance will bring the 1.0705 (major 38.2% retracement on post-Trump rally) in radar.
The GBP/USD is rangebound at about the 1.25 mark against the US dollar. We keep our neutral bias between 1.2410 and 1.2575. Due today, the January retail sales data in the UK is expected to have reversed the unexpected contraction of December. A solid read could give a hand to the GBP-bulls and help the GBP/USD toward the 1.2575-resistance, while a second month of disappointment which would reaffirm that the uptick in January inflation is not demand driven, should encourage sellers at 1.25 and above.
The UK stocks have come off their mid-February highs on firmer pound. The FTSE 100 closed 0.34% lower on Thursday and is expected to open slightly softer at 7275p in London. The pound’s direction should be determinant before the weekly closing bell.