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By xemarketanalysis January 8, 2019 12:01 pm
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    XE Market Analysis: The US Dollar is Vulnerable to the Ongoing US Government Shutdown

    OVERVIEW

    • The greenback tries to recover from its lowest levels in four weeks, up by 0.30%
    • Investors are becoming optimistic about China-US trade talks, and are moving their funds out of safe haven assets. Gold is down by 0.60%.
    • A barrel of NYMEX WTI Crude consolidates near a three-week high.

    HIGHLIGHT

    The greenback is in recovery mode this morning, trading 0.35% higher versus the major currencies. After a strong performance during 2018, the US dollar is under selling pressure due to political disputes in Washington, amidst growing fears of a global slowdown. The market will close as the world watches the President’s speech from the Oval Office at 9 pm Eastern time.

    US DOLLAR

    The greenback is making rare gains against its G-10 peers this morning. Investors are confident that China and the US will agree on some sort of a trade deal. Tweets from the White House signaled “talks are going very well”. WTI is consolidating near three-week highs, and investors are pulling out of safe haven assets. The economic calendar remains very light, and the market is holding its breath, awaiting the 9 o’clock Trump show. The US President is expected to make an announcement on the current government shutdown and national border security. Once again, the political drama could inject more volatility into the currency market.

    BRITISH POUND

    The British Pound erased yesterday’s gains as the greenback bounces back against the majors.  Investors are recalibrating their positions ahead of the key meaningful Brexit vote on January 15th. Members of UK Parliament have renewed their discussions and the odds are fiercely against PM May’s deal.

    EURO

    EUR/USD failed to crack the 1.15 psychological 1.15 level and is currently trading within yesterday’s range. Today's economic calendar is light, with only the German industrial output data released earlier today. Industrial production was down 1.9% in November from October. The pair is expected to oscillate at current levels with an eye on 1.15 mark. 

    CANADIAN DOLLAR

    USD/CAD is consolidating near a five-week high,  as the loonie is once again drawing support from strengthening oil prices. WTI is trading higher 1.30% on the day. Data released this morning showed Canadian exports fell 2.9% in November as a result of lower crude oil exports. The trade deficit widened to $2.1 billion in that month. Investors should be concerned that exports were down for the fourth consecutive month and could weigh on the CAD. The Bank of Canada meets tomorrow and is widely expected to keep rates unchanged.

     

    AUSTRALIAN DOLLAR

    AUD/USD failed to move higher despite positive reports coming from US-China trade talks. The greenback gained, while a drop in Australian trade surplus weighed on the AUD. A breach below the 0.71 level could push the pair toward new lows.

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