European Stock Futures Surge, Sterling On Fire

European Stock Futures Surge, Sterling On Fire

European stock futures are continuing their upward trend, and investors are picking up the momentum from where they left off yesterday. Over in the UK, we saw the FTSE 100 index roaring to the upside as investors became a lot more optimistic about the vaccine progress–the country has achieved its vaccine target on time. Over 15 million people have received coronavirus vaccine in the UK, and this is giving the government confidence that they can not only achieve their other targets but also ramp up their vaccination process. In addition to this, if one looks at the number of people losing their lives because of coronavirus along with the hospitalization rate and new people catching coronavirus, all of them have started to drop quite a lot from their recent high. 

Boris Johnson, the UK Prime Minister, has also started to talk about the exit strategy from the current national lockdown. He is assuring the public that this is the last lockdown that the UK will face. There is no doubt there is no literally zero appetite among businesses for another lockdown, and assuring them that there will be no further lockdown is the kind of news that businesses want to hear. This will boost the investor and business confidence. 

The DAX Index

As for the rest of Europe, it is pretty clear that the biggest economy of the Eurozone, Germany, is heading towards extending its lockdown towards early March. Chancellor Angela Merkel is worried about the new coronavirus variant, and she is not willing to take any chances at all. We saw decent price action for the German stock index, the Dax, yesterday despite the lockdown news. Today, the futures are trading in a positive direction. The reason investors are feeling more optimistic about this is that they also know that the government will not be extending the lockdowns any further. 


In terms of currencies, the Sterling is absolutely on fire, and the currency is experiencing sharp upward moves. The reason behind this upward move is certainly enormous optimism about the lockdown coming to an end, but also investors are buoyant about the economic data as well. The economic numbers we have seen so far have given one clear message: the economy still has a lot of life left, and chances of a strong recovery are only increasing. Tomorrow we are going to get the CPI number, but the most important economic data for Sterling will be coming on Friday when we will see the retail sales. As always, retail sales numbers show the actual condition of consumer spending. So far, the unemployment rate has been kept lower because of government support, and this has kept the retail sales number on the positive side. On Friday, market players are once again hoping to see another positive reading, but the actual condition will only come to the surface when the government withdraws its support. 


Oil prices recorded their pandemic high yesterday, and the move is very much driven due to the improving coronavirus situation. Traders know that we are getting closer to a day when national lockdowns will come to an end, and restrictive coronavirus measures will also be relaxed. All of this should support the oil demand as the oil supply remains on a very tight leash. Looking at the oil price action, it becomes increasingly clear that prices still have a lot more momentum left and the only possible direction for the Brent prices is to the upside. The near term target is at $65. Having said that, it is important to keep in mind that oil prices have also become too rich, and the retracement is also due. We have been talking about this since last week, but so far, we have not seen much on this. Nonetheless, the overbought levels of the RSI on the daily time frame are calling for caution.