02/ 01/ 2020

US-China Trade Optimism & Geopolitical Tension are in the Spotlight

EUR/USD has been having an active New Year's Eve – hitting a new cycle high at 1.1223, at the time of writing. It last traded at these levels in mid-August. The US dollar has been on the back foot in the last days of 2019, amid end-of-year flows.

The greenback is also suffering a diminishing demand for safe-haven assets. Optimism about a US-Sino trade deal prevails with Chinese vice Premier Liu He is set to travel to Washington on SaturdayDespite most markets being closed amid the New Year’s Eve holiday, major currencies are showing signs of life, with the greenback still being the weakest. The GBP/USD pair is a handful of pips below the 1.3200 threshold, trading at its highest in two weeks.

The enthusiasm triggered by PM Johnson’s victory in the general election sent the pair up to 1.3513, from where it plunged to 1.2904 in a matter of days, on the back of Johnson’s decision to cap the negotiation period with the EU to December 2020.

Looking ahead, manufacturing data will be the major focuses for the rest of the day from Eurozone, UK,Canada and US with jobless claims. Outside of the numbers, market risk sentiment towards the U.S – China phase 1 trade agreement also provided direction.

31/ 12/ 2019

Dollar’s Weakness Extends Into Year-End

The EUR/USD pair peaked at 1.1210 early on Monday, a level that was last seen mid-August, as the broad dollar’s weakness was again the main theme across the FX board. Volumes remained thin amid winter holidays, while the calendar was quite scarce.

The GBP/USD pair benefited once again from the dollar’s weakness, with buyers putting aside Brexit concerns. The pair surged to 1.3150, its highest in two weeks. Market players are still concerned that PM Johnson’s decision to limit the transition period to December 2020 would end up in a hard-Brexit.

30/ 12/ 2019

Week Ahead | The Macroeconomic Calendar will Remain Scarce throughout the Week

Dollar trades generally lower as markets started another holiday shortened week quietly. With an empty calendar in Asia, focuses were mainly on geo-political news, which weren’t very much market moving. For now, commodity currencies are the next weakest following the greenback.

The EUR/USD pair closed the week at 1.1175, its highest daily settlement since early August, although it held below December’s peak at 1.1199. The American dollar weakened Friday following the Christmas holiday, with the movement exacerbated by thin volumes.  There was no significant catalyst behind the dollar’s slump, but risk appetite dominated the financial world, triggered by news that the US and China are arranging a ceremony to sign phase one of their trade deal. A sustained Sterling advance, however, is yet to be seen. Indeed, UK PM Johnson put an end to the political deadlock by passing his deal through the Parliament after the elections. However, he also put a term to trade negotiations, as the Brexit transition period could not be extended beyond December 31st, leaving just eleven months to clinch a deal.  On Friday, the European Commission president, Ursula von der Leyen, expressed her concerns that such time won’t be enough to define the future relationship between the EU and the UK. Political uncertainty will likely return to be the main driver for Pound once the markets return to normal post-winter holidays.

The upcoming week will also be filled with holidays, with the market volume not expected to return to normal until the second week of January. This Monday, the macroeconomic calendar will bring German Retail Sales, seen up in November by 1.0%, while the US will publish November Trade Balance and Pending home sales.

24/ 12/ 2019

Geopolitics Remains in Focus as Holiday Mood Kicks In

As we come towards the end of 2019, it seems that there is a positive bias to the macro picture that has been dominating market sentiment throughout the year. Donald Trump supposedly had a “very good talk” with President Xi of China and that a formal signing of a trade deal (phase one) would be signed “very shortly”. Perhaps in a sign of fatigue, markets have reacted with a shrug of the shoulders. We have been here before, and there is always the potential for a “buy on rumor, sell on fact” reaction. However, this should only be a short-term response, as confirmed positive traction and a floor under the trade tensions will set markets on a far more constructive path for risk appetite in 2020. What is curious is that the opposite of what might have been expected is reflected in price moves this morning. 

Sterling is trading as the weakest one for yesterday as it suffers renewed selling ahead of holidays. Canadian Dollar is currently the second weakest, weighed down by unexpected contraction in October GDP. Meanwhile New Zealand and Australian Dollars are the strongest ones, lifted by China’s move to lower import tariffs. Dollar shrugs off much weaker than expected durable goods orders.

It’s going to be a quiet day ahead, with no material stats to consider. With some markets closed and others on a half-day, volumes will be light.