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By xemarketanalysis January 11, 2019 11:09 am
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    XE Market Analysis: Investors Growing Impatient with US Government Shutdown

    OVERVIEW

    • The Dollar Index remains in negative territory for the fourth consecutive week, amidst dovish Fed and continuing government shutdown. 
    • Gold is up $2.15 as investors seek safe haven assets ahead of significant events risks with the Brexit vote due next week.

    HIGHLIGHT

    The GBP/USD pair has been trading in a consolidation mode after last week’s flash crash. We expected the pair to attract more volatility as we move closer to January 15th when the UK parliament foes for the meaningful vote. As the ongoing debates unfold, it is looking increasingly certain that the Brexit deal will bite the dust and inject more uncertainties.

    US DOLLAR

    The greenback is set to close the first full week in the negative territory for the fourth consecutive session. The market is starting to grow impatient with US government shutdown. The DXY Index is down 0.2% with CPI data matching market estimates. Federal Reserve officials are signaling in unison that they are more likely to pause their rate increases. The Euro continues to hang around the 1.15 handle after clocking a three-month high yesterday. There is no other major data release in the docket today, and we expect political chaos in Washington to weigh on the greenback and favouring safe haven assets.

    BRITISH POUND

    Parliamentary debates on the EU Withdrawal plan is expected to continue to dictate the pace and direction of the GBP. It is looking increasingly certain that the members will reject the Brexit plan, adding to more woes and uncertainties for currency investors. Meanwhile, UK GDP grew 0.3% in the three months to November 2018 with notable negative growth in the production sector.

    EURO

    EUR/USD is oscillating around the 1.15 handle. The single currency is attracting flows from dovish comments from the Fed and ongoing Brexit debate in the UK Parliament. There were no economic data releases from the Old Continent, and the pair is expected to trade along broader market sentiment. 

    CANADIAN DOLLAR

    The Canadian dollar maintains a bullish tone against the greenback as crude oil moved higher for the 10th session. WTI climbed above $52 a barrel and is up 16% this month alone. The cautious stance from the US Federal Reserve from Fed Chair Powell and prolonged shutdown of the US government are the main drivers behind recent moves. Investors seem to have conveniently ignored recent dovish statement from the Bank of Canada, preferring to focus on external factors from across Canada's southern border. 

    AUSTRALIAN DOLLAR

    AUD gained against the greenback after reports emerged that Chinese Vice Premier Liu will visit the US for more trade talks. This news is positive for proxy currencies. AUD/USD also got a shot following better than expected retail sales numbers. The trend estimate rose 0.4% in November 2018.

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