FTSE +3 points at 7481
DAX +18 points at 12690
CAC +11 points at 5276
Euro Stoxx +4 points at 3552
Asia traded in a slightly risk-off mood due to soft economic data out of Japan, China and Australia, and a busy eco-political agenda later today, including former FBI director Comey’s testimony, the UK snap general election and the European Central Bank (ECB) meeting.
The election polls in the UK have been hectic, as PM Theresa May’s Tories lost their popularity meaningfully during the recent weeks. It is likely that the Conservatives walk out with a slim majority. If this is the case, cable should remain ranged between 1.28/1.30 area. A strong majority for Tories could send the GBP/USD above the solid 1.3045 mid-term support (major 38.2% retracement on post-Brexit sell-off).
On the other hand, a hung Parliament will certainly trigger significant capital outflows from the UK assets, but still is expected to be less harmful for the pound than a Labour win. In this context, an unexpected and sudden shift to the Labour Party would change the Brexit dynamics completely and push the political environment in the UK to a complete unknown. Banks and financials could suffer the most in case of a Labour majority.
The FTSE 100 is expected to behave parallel to the pound in the medium term, once the short-term impact of stronger, or softer, pound is digested.
The first exit polls will be out at 10pm UK time and first results are expected an hour later. We expect to have a clearer picture at about three hours after the first exit polls.
The European Central Bank (ECB) meets today and is expected maintain its policy rates unchanged. The statement will be in focus, the majority of analysts expect the ECB to modify the language of its statement, more precisely, replace ‘risks to growth’ by a more balanced view. The ECB could revise its growth forecasts higher, while softening its inflation outlook.
The Quantitative Easing (QE) exit strategy will unlikely be part of discussions. The EUR/USD consolidated gains in the tight range between 1.1247/1.1266. Key resistance is eyed at 1.1300 mark, if broken, will shift the mid-term focus to 1.1500 mark in the continuation of stronger euro and softer US dollar.
Gold traded down by 0.14% despite the limited risk appetite in Asia. However, the yellow metal could pare earlier losses throughout the European and US sessions given that some investors would prefer to park their cash in a safer harbour. For a risky day as today, the $1’300 level per ounce is a reasonable target for gold lovers.
Oil tanked by 5% yesterday, as the EIA report revealed unexpected 3.3 million barrels rise in the US inventories last week, versus a contraction of 3.1 million barrels expected. The WTI crude tanked to $45.80, the minor 76.4% retrace on May rise. The sell-off could extend toward the $45 mark.
Japanese GDP growth eased to 0.3% in the first quarter from 0.5%, versus 0.6% expected by analysts. The sharp narrowing in the trade terms has been the major cause of the weak first quarter performance in Japan, while the business investment accelerated faster than expected. The USD/JPY remained quiet below the 110.00 mark.
The Australian and Chinese trade data surprised on the downside as well. Australian trade surplus collapsed from A$ 3’169 million to A$ 555 million in April, versus A$ 2,000 expected, on the back of a sharp fall in commodity prices. China’s imports rose unexpectedly and capped the May trade surplus at $40.81 billion, versus $47.80 billion expected by analysts. Chinese exports were satisfactory however, keeping the sentiment slightly positive. The AUD/USD remained offered at the 100-day moving average, 0.7550
Quick glance at technicals on LCG Trader:
EUR/GBP intraday: under pressure. Short positions below 0.8715 (pivot) with targets at 0.8675 & 0.8655 in extension. Above 0.8715, upside potential to 0.8740 & 0.8755.
EUR/JPY intraday: upside prevails. Long positions above 122.95 (pivot) with targets at 123.85 & 124.15 in extension. Below 122.95, downside potential to 122.60 & 122.25.
FTSE 100 (ICE Europe) (M7) intraday: downside prevails. Short positions below 7491.00 (pivot) with targets at 7458.00 & 7430.00 in extension. Above 7491.00, upside potential to 7513.00 & 7545.00.