European stocks edge higher despite new covid-19 restrictions

European stocks started the new week on a positive note, gaining on hopes of the US government announcing a new stimulus package and China reporting upbeat growth data. The STOXX Europe 600 index climbed 0.15% to 368.02, after shedding 0.8% last week. France’s CAC 40 gained 0.25% to reach 4,949.14, despite a technical glitch resulting in a temporary pause in the trading of all instruments this morning.

European stocks were also propelled by several companies reporting results this morning, including Julius Baer, Philips, and Groupe Danone.

Investor sentiment was supported by China reporting 4.9% economic growth in the third quarter, following 3.2% growth in the April-June period. Although the latest figure missed the consensus view, it indicated accelerating growth in the world’s second largest economy. The steady recovery of the Chinese economy from the impact of the pandemic bodes well for European countries. September data showed China surpassing the US as the EU’s largest trading partner.

The FTSE 100 bucked the trend and slipped by 0.32% to 5,900.65. British stocks witnessed pressure, as the pound gained strength this morning. The GBP/USD gained 0.76% to cross the $1.3000 psychological barrier. Investors seemed to shrug off the downgrade of the UK economy’s rating by Moody’s due to concerns over the impact of a no-deal Brexit.

After recording gains last week, US equity futures continued their positive momentum this morning. The trend indicates a strong open at Wall Street today.

EUR/USD

The EUR/USD has been on an uptrend today, rising from around 1.17030 to breach the 1.17820 mark. The pair briefly touched 1.17897 earlier today; but could not hold its gains and soon slipped to 1.17800. Any US stimulus related news will simultaneously support the euro and put pressure on the greenback. Despite the upturn and possibility of support, bearish sentiments remain for the euro. The single currency may be infected by virus concerns. The EUR/USD may test the 1.17000 support level during the course of the day. If the euro breaches this support level, it may gain downside momentum and head towards the 1.16500 mark. 

AUD/USD

The Australian dollar remained under immense pressure last week. The Aussie slid sharply on concerns related to the Reserve Bank of Australia’s dovish stance. News of China suspending Australian coal imports added to the pressure. Following last week’s correction, the AUD/USD rose this morning, albeit amid high volatility. Although mounting tensions with Beijing continued to exert pressure, the Aussie was supported by the strong economic growth reported by China, its largest trading partner. The AUD/USD could continue its uptrend today, with 0.71100 remaining a strong resistance level. The support level for the day is at 0.69700.

GBP/USD
Brexit and covid-19 related lockdowns could continue to determine the fate of this pair. Indicators show the GBP/USD as remaining range-bound today between 1.32 and 1.29. The pair has been supported by weakness in the greenback. The US dollar appears oversold, not just versus the pound, but also its other major rivals. The US dollar buying opportunity may take the pair down to the support level of 1.28.