European bourses rebound; USD lacks direction

European stocks are rebounding after steep losses in the previous session. Concerns over slowing global economic growth, rising Delta cases and the Fed moving towards tightening monetary policy proved too much for the markets to swallow. Stock indices, which were trading around all-time highs, came off. Key technical levels were tested but not meaningfully breached. As a result, dip buyers are back in today, picking up bargains.

The French CAC is leading the charge in Europe, trading up more than 2%. Meanwhile, the Italian FTSE Mib is outperforming the FTSE. Here’s hoping this isn’t an ominous sign for Sunday’s final!

The UK index is charging higher despite disappointing GDP data. The British economy grew a less-than-expected 0.8% MoM in May, well below the 1.5% forecast. April’s GDP reading was also downwardly revised to 2%. The data shows the economic rebound started to ease in May, even as the reopening was still in full swing. The UK economy could do with a leg up. Maybe football euphoria could translate into an economic boost, but we will have to wait until July for that.

Weakness in the pound is doing the heavy lifting in the FTSE, an index dominated by foreign earning multinationals. Travel stocks are flying higher after the British government eased travel restrictions on double-jabbed British tourists flying back from amber-list countries.

Looking ahead, US indices are pointing to a stronger start on the open, suggesting that yesterday’s sell-off could have been simply a healthy technical correction rather than anything more ominous.

Big tech could be under the spotlight as finance ministers and central bankers from the 20 largest economies meet in Vienna. Corporate tax reform will be at the top of the agenda, as the group looks to build on the momentum created at the G7 meeting.

FX – USD holds steady after heavy losses

The US dollar is consolidating after steep falls in the previous session. The greenback traced US treasury yields lower on Thursday as traders showed less concern over elevated inflation and interest rate rises than the Fed in its slightly more hawkish FOMC minutes.

Expectations that the US economy has passed peak growth dragged on demand for the US dollar. Evidence of a stalling recovery in the American labour market came from US initial jobless claims unexpectedly rising last week.

Interestingly the US dollar failed to pick up safe-haven bids, even as the stock markets slumped across the board.


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Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.
Sophie Griffiths

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