30/ 01/ 2019

GDP Numbers and the FED Put the Dollar in the Spotlight

Sterling tumbled broadly as the UK opened a new chapter in Brexit negotiation with yesterday’s parliamentary amendment votes. In short, Prime Minister Theresa May needs to go back to EU to renegotiate the Irish backstop into alternative arrangements. But EU has repeated its stance on no renegotiation. For now it’s uncertain whether there could be on standoff on the issue. But so far, losses in the Pound are relatively limited as it stabilized in Asian markets.

The greenback will look into today’s FOMC statement and press conference. Traders will also keep an eye on US-China trade talks, as high level meeting between Chinese Vice Premier Liu He and US Trade Representative Robert Lighthizer starts today in Washington.

29/ 01/ 2019

Dollar Flat Before Fed Meeting, US-China Trade Talk & Brexit Plan B on Spot

Asian markets closed flat and mixed on Monday after a volatile day of trading. The major indices had been largely higher in the early portion of the session but gave up their gains in the last hour of trading as trade-talk fears resurface. Chinese Vice Premier Liu He is scheduled to meet with top-level negotiators in Washington later this week. There is no expectation a trade deal will be reached but most market watchers agree forward progress is expected, at least enough to stave off the next round of US tariffs slated to go into effect at the end of March.

Optimism fades in the EU as the US/China trade war wears on and Brexit deadline fast approaches. In Brexit news, the UK Parliament is expected to vote on new terms Theresa May will then have to take to Brussels. The terms, whatever they may be, are not expected to be accepted by the EU. EU negotiators have already stated, and reiterated, that the current deal is not up for renegotiation. If this turns out to be true an already likely hard-Brexit becomes more likely.

Looking ahead, it’s round 2 on the Brexit front, with Parliament preparing for a Plan B vote.

27/ 01/ 2019

Week Ahead | Draghi, FOMC & NFP will be in focus while Theresa May's plan B will take Spotlight

It was a tough week for FX traders, which kept struggling to find a directional catalyst in a risk-averse environment. Draghi was cautious, warning that further deceleration in economic situation could be deeper and longer than previously estimated, somehow suggesting that the central bank may take longer to pull the trigger, previously expected by the end of this year. 

Dollar ended last week as the weakest one after deep selloff before weekly close. A whole lot of events are scheduled ahead to keep the greenback busy. Those include FOMC rate decision, US-China trade talk, non-farm payrolls. Also, the partial government shutdown has finally ended temporarily and we’ll have more economic data for gauging the economy of the US. Sterling ended as the strongest one and maintained strengthen towards the end. It’s boosted by receding chance of no-deal Brexit. The debate and vote on amendments in the Commons on Tuesday will likely provide a more concrete path forward regarding Brexit. Euro was surprisingly resilient and survived a batch of weak data as well as dovish ECB. The common currency will face tests from GDP and CPI this week.

24/ 01/ 2019

Trade War Worries and Eurozone PMIs & ECB Key Focus

The dollar edged down against a basket of currencies on Wednesday as uncertainties over trade and the global economy clouded the U.S. currency’s near-term outlook and restricted it to tight trading ranges against other major currencies. Sterling leaped to a 10-week high after Britain’s opposition Labour Party said it would back an attempt by lawmakers to prevent a disorderly no-deal Brexit. The United Kingdom is due to leave the European Union on March 29 but has no approved deal on how the divorce will take place.

Looking ahead, european majors are trading generally higher today as Eurozone will take the center of stage. There are worries of deeper and longer than expected slowdown in the Eurozone economy. PMIs from Germany, France and Eurozone will provide some hints on economic performance at the start of the year. ECB rate decision will for sure be the focus too. In particular, the tone of the post-meeting press conference will likely turn more cautious, if not dovish. Hence, while Euro is recovering, there is risk of renewed selling ahead, which might also drag down the Swiss Franc and, to a lesser extent, Sterling.