European markets saw a decent rebound yesterday, helped in no small part by a similarly resilient performance from US markets, with the Nasdaq hitting a two-week high, as stocks in the US broke a three-day losing streak.

Today’s European open looks set to be a cautious but positive one, and somewhat characteristic of this week where we’ve seen sharp moves higher and lower, as investors wrestle with indecision about the direction of the next move, caught between optimism over the economic reopening, and concern over central banks acting too late to address an inflationary surge.  

As we look ahead to the day ahead, the main focus is set to be on the latest flash PMIs for May, from France, Germany, the UK and the US. Before that we have UK retail sales for April.  

UK retail sales have slowly been recovering since the big -8.2% decline seen in the January numbers, which came about as a result of the total lockdown imposed at the beginning of the year.

Since then, we’ve seen a slow and steady recovery with a 2.1% rise in February, and then a 5.4% rise in March driven primarily as a result of people shopping in garden and DIY centres, resulting in a 16% rise in household goods.

March also saw a big rebound in clothing sales as consumers looked towards further easing measures in April, along with higher fuel sales as people started to move around more. The further easements seen in April are likely to see retail sales growth continue with expectations of a 4.5% rise in the monthly number, and an annualised surge to 36.8%. With respect to the annualised number, it should be remembered that retail sales fell off a cliff this time last year, so there will be considerable base effects in today’s number.

The direction of travel for April retail sales is likely to be for a similarly positive number in the wake of the 12th April easing measures, something that was borne out by a big jump in the recent BRC retail sales numbers which showed a decent improvement in April.

We also have the latest flash PMIs for May which if the recent April numbers are any guide are likely to be similarly positive.

The April PMIs painted a robust picture with services activity hitting a six and a half year high at 61, while manufacturing rose to 60.9, an 8-month high.

UK companies were reporting higher demand for both goods and services, which in turn is causing some cost push inflation, while the jobs market is also looking good with firms being encouraged to take on extra staff at a rate not seen in over three and a half years. Today’s May flash PMIs are expected to be similarly positive with services activity expected to rise to 62.2, while manufacturing is predicted to remain steady at 60.8.

All in all, optimism is high with the only question being whether or not what we are seeing is sustainable through the summer.

In Europe the picture is also starting to look a little more positive, however both France and Germany still face a number of headwinds that the UK economy has managed to overcome. Its vaccination programs are slightly behind and their infection rates are higher.

We’re starting to see slow improvements here, particularly in services PMI’s however the picture is patchy. Manufacturing continues to stand apart with both Germany and France maintaining recent resilience in April with only a modest softening to 66.2 and 58.9 respectively.

Services still remain very much the laggard and while there have been attempts at reopening some parts of their economy the high levels of infection still continue to act as a drag.

Fortunately, the vaccination program, particularly in Germany is gaining traction, however that hasn’t stopped economic activity from slipping back in the most recent April numbers which saw modest declines to 49.9, while French economic activity improved slightly from 48.2, to 50.3. With large parts of the German economy locked down until June we may see a modest improvement but it’s not expected to be strong with a reading of 52 expected. France is expected to come in at 53, up from 50.3.

The latest US flash PMIs for May are expected to retain their recent resilience with both manufacturing and services predicted to come in at 60.8 and 62.2 respectively.   

EURUSD – still has resistance at the 1.2250 area yesterday, matching the peaks seen at the end of February. If we break above 1.2250 it opens up the prospect of a move back towards the 1.2345 level. A failure argues for a return to the 1.2040 area.

GBPUSD – still struggling to overcome the 1.4200 area, however a break above opens up the prospect of a move towards the 2018 peaks at 1.4375. A failure to overcome 1.4240 keeps the bias towards 1.4000.  

EURGBP – continues to find itself capped at the 0.8640 area which keeps the bias towards the downside, with the potential to slip back towards the 0.8560 area on a break below 0.8600. Above 0.8640 opens up the prospect of a move towards the April highs at 0.8730.

USDJPY – feels vulnerable to a move below trend line support from the January lows at 108.60. We need to get back above 109.80 to kick on towards 111.00. A move below 108.00 opens up the prospect of a move back towards 106.80.

FTSE100 is expected to open 4 points higher at 7,023.

DAX is expected to open 5 points higher at 15,375.

CAC40 is expected to open 15 points higher at 6,358.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.5% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

GBP/USD pokes weekly resistance line around 1.2100

GBP/USD pokes weekly resistance line around 1.2100

GBP/USD picks up bids to extend the previous day’s recovery to 1.2100 during Wednesday’s Asian session. In doing so, the Cable pair approaches a one-week-old resistance line while also portraying the third bounce off the 50% Fibonacci retracement level of July-August advances.


EUR/USD: 1.0100 remains in sight below 21 DMA, EU GDP, Fed minutes awaited

EUR/USD: 1.0100 remains in sight below 21 DMA, EU GDP, Fed minutes awaited

EUR/USD consolidates the previous rebound amid a cautiously optimistic mood. US dollar takes a breather ahead of Fed minutes, the euro awaits Eurozone GDP. The shared currency remains weighed down by recession fears and gas crises.


Gold bears are lurking below $1,785

Gold bears are lurking below $1,785

Gold is flat on the day trading at around $1,776.50 and sticking to a tight range of between $1,773.91 to a high of $1,776.85. The yellow metal fell due to rising Treasury yields weighed on investor appetite. A slightly stronger US dollar was also a headwind for investor demand. 

Gold News

Dogecoin price to provide a buying opportunity before exploding 35%

Dogecoin price to provide a buying opportunity before exploding 35%

Dogecoin price sees a slow decline in bullish momentum as a major hurdle puts an end to its explosive move. A pullback is emerging for DOGE and is likely an opportunity that will allow bulls to recuperate and prepare for the next rally.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!