Activity in US and European futures hint at consolidation at the open, but the market direction remains tilted to the upside on the back of a resilient optimism in risk assets.
Oil traders remain hesitant to strengthen their long positions above the $40 per barrel, as the stock price inflation doesn’t necessarily improve the underlying supply-demand dynamics in the oil markets. The rebound in global industrial production and US inventories data should distinguish between a further advance towards the $45 mark, and a correction below $40.
The German industrial production rebounded 7.8% m-o-m in May, less than 10% anticipated by analysts. Combined to yesterday’s softer-than-expected factory orders, the data warns that the economic rebound in Germany may not be as strong as priced in by the market. The EURUSD gave a negative kneejerk reaction to German figures but buy-the-dip remains the consensus trade in EURUSD ahead of the July 9 Eurogroup meeting, where the 750-billion-euro fiscal rescue package could finally see the daylight.
Cable consolidates near the 1.25 level, mostly driven by the global US dollar appetite. Price advances are interesting top selling opportunities for sterling bears as lingering Brexit uncertainties should cap the topside near the 200-day moving average, 1.2685.
By Ipek Ozkardeskaya
