The USD is trading higher this morning, as the threat of war between the US and Iran has eased following President Trump’s remarks yesterday regarding the situation. Instead of further threats to strike Iran, the President is looking for a new nuclear deal. The President indicated the U.S. would impose further sanctions on the Islamic Republic in an effort to get them back to the negotiating table. These comments not only improved the USD but also saw stock prices rise and oil prices retreat. The US stock market began rising as the President spoke and eventually ended up over 160 points. Asian and European equity markets have followed suit, all enjoying gains on the day. The DOW Futures during early morning trade are looking at a positive opening of around 150 points later this morning. Traders of the USD and equities will now begin to focus on tomorrow’s release of US Non-Farm Payroll for December. This number is expected to show an increase of 160,000 jobs last month after the previous increase of 266,000 jobs. More on that tomorrow morning. There will also be plenty of speeches from the US. Central bank policymakers as Presidents from Minneapolis, New York, Richmond, Chicago, and St. Louis are scheduled to speak at different events today.
EUR/USD also fell yesterday and continued lower in overnight trading despite a better than expected release in German Industrial Production, as it was up 1.1%, higher than both the expected 0.8% and the previous number of -1.7%. Analysts and traders continue to be wary of any possible near-term improvement in the Eurozone economic base, and this skepticism will continue to weigh on the EUR.
GBP/USD followed the others lower yesterday, falling over 100 points, reaching it’s lowest level since the beginning of the new year, as Bank of England Governor Mark Carney spoke in London, saying that weakness of the currency could get a prompt response from the Bank indicating a possible rate cut. That has added to growing market concerns regarding Brexit. Comments made from the EU side said a full EU-UK partnership deal would not be possible by the end of 2020, adding to the risk of a no-deal Brexit on January 31.
As expected the USD/JPY rose on Thursday as traders resumed risk-on trading following the President’s speech. After reaching a three-month low following the missile attacks on Wednesday, the USD/JPY improved over 150 points on Thursday. Analysts now expect traders to resume their focus on the global economy and the expected signing of Phase One of the US-China trade agreement.
As tensions ease in the Middle East, oil prices have moved back towards pre-engagement levels and have moved USD/CAD higher. Looking at economic data from our northern neighbors, Housing starts are expected to slip below 200,000 for the first time since May 2019.
China’s Vice Premier Liu He, the top trade negotiator for China during US-China trade talks will travel to Washington, D.C. from Jan. 13-15 and head the Chinese delegation. This is the first confirmation from the Chinese of the trade deal signing. There is no further information on the next phase of talks although President Trump has indicated willingness to go to China to begin the second phase.