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By XE Market Analysis January 8, 2020 3:11 pm
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    XE Market Analysis: Asia - Jan 08, 2020

    The Dollar firmed in N.Y. trade on Wednesday, helped by a stronger than expected December ADP jobs report, along with safe-haven USD buying following the Iran missile attack on U.S. bases in Iraq. Trump later spoke, saying Iran appears to be "standing down". Wall Street rallied on the deescalation talk, while Treasury yields rose, supportive of the Greenback. EUR-USD bottomed at 1.1109, down from overnight highs of 1.1169. USD-JPY recovered to near 109.20 from overnight four-month lows of 107.64 as risk appetite returned. USD-CAD rallied to 1.3044 as oil prices collapsed, while Cable ranged between 1.3135 and 1.3083, settling just over 1.3100.

    [EUR, USD]
    EUR-USD faded to nine-session lows of 1.1109 into the London close, coming from Asian highs of 1.1169. Weak Germany manufacturing data weighed on the pairing overnight, along with safe-haven USD buying in the aftermath of Iran's missile strike. Later, a better ADP jobs report limited upside rebound. The apparent deescalation of the U.S./Iran situation following Trump's comments resulted in the reversal of haven flows, allowing EUR-USD to bounce over 1.1125. Next support is at the December 27 low of 1.1096.

    [USD, JPY]
    USD-JPY rallied to eight-session highs near 109.20, up from near 108.60 earlier, with gains coming following Trump's address on Iran. The president said Iran appears to be "standing down", and made no mention of further U.S. military actions. Iran's overnight missile attack aimed at U.S. forces in Iraq looked to be more of a face-saving operation than anything, and looks to have gone some way to calm markets. Indeed Wall Street has rallied sharply following the speech, while oil prices have tanked. The risk-back-on reaction has been the main driver of USD-JPY strength.

    [GBP, USD]
    Cable was choppy inside a narrow range, bottoming at 1.3081 into the open, then rallying to 1.3135 before again testing the lows. UK prime minister Johnson met with the new president of the European Commission, Ursula von der Leyen, along with the EU's chief Brexit negotiator, Barmier. Into the meeting both, not surprisingly, have come out strongly on Johnson's 11-month time frame to strike a new trade deal with the EU. Von der Leyen said it would be "impossible" for the UK to negotiate a comprehensive trade deal over this time in a speech, and that the price of a clean-break Brexit at the end of the year would be a "distant" partnership with the EU. Uncertainty over negotiations will likely limit the Pound's upside.

    [USD, CHF]
    EUR-CHF rallied from 30-plus month lows of 1.0782 after Iran's missile strike on U.S. bases in Iraq. The selling was driven by the Franc's safe-haven status, coming on the back of geopolitical fears in the mid-east. Later, as Trump said it appears Iran is "standing down", the cross headed up to 1.0824 highs.

    [USD, CAD]
    USD-CAD rallied to 1.3044 seven-session highs, up from an overnight base of 1.2974. The lows came after Iran's missile strike, which saw oil prices spike to over eight-month highs, though the tepid Iranian response to the U.S. drone strike in Iraq last week, along with an unexpected crude inventory build as reported by the EIA, saw oil prices plummet by over $5/bbl since then, supporting USD-CAD.

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