USD in Demand
The US dollar has kicked off the week on a firm footing with the index rallying up to 97.21 last, just shy of the 97.26 level. Better data last week helped underpin USD, despite a weaker than expected NFP reading.
US CPI is on watch this week, which could see further buying for USD. Away from data, the main market focus will be on the signing of the phase one trade deal between the US and China, due on Thursday.
Euro Under Pressure
EURUSD has been weaker today in light of the rally in USD which has seen the pair falling back down to 1.1117 last. Looking ahead this week, the main data focus will be the release of the ECB December meeting minutes.
Traders will be keen to learn of the full discussions which took please at Lagarde’s first meeting as the new head of the ECB, particularly with a view to how much support there still is for further easing.
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GBP Heading Lower
GBPUSD has been lower again today. The rally in USD sees the pair falling back below the 1.3014 level to trade 1.2974 last. Despite parliament backing the PM’s Brexit bill last week, GBP has been weighed on by comments from Bank of England’s Carney.
Carney said that the BOE could still be forced to cut rates if the economy doesn’t pick up in the wake of Brexit, citing growth remaining low.
Risk Rally Back On
Risk assets have started off the week well. SPX500 has traded back up to 3276.93 last, having found support at a retest of the 3260.88 level.
The calming of the situation between the US and Iran has shifted focus back onto positive expectations around ongoing US/China trade talks.
With the phase one deal due to be signed this week, as well as the announcement over the weekend of new semi-annual US/China economic talks, the market is hopeful that the trade war is coming to an end.
Crude Under Pressure
Oil prices have been a little softer over the European morning on Monday. With the US and Iran having avoided a military conflict (at least for the time-being) oil prices have reverted back to trading on supply/demand drivers.
Last week, the EIA reported a fresh inventory surplus in crude. This has seen price falling back to 59.17 as of writing, back below the key 60 level again for now.
Loonie Looking Better
USDCAD has been a little firmer today. The pullback in crude prices, along with the rally in USD is helping the pair climb higher. Last week, the Canadian unemployment rate fell down to 5.6%, from 5.9% prior, over December.
However, for now, the weakness in crude is driving CAD lower with the pair trading 1.3059 last.
Aussie Heading Lower
AUDUSD has been lower again this morning. The economic fallout from the bushfires in Australia is bolstering expectations that the RBA will be forced to cut rates when it meets in February.
AUD has been boosted by better US/China trade deal hopes. However, in light of domestic events, the outlook has turned bearish again for now. AUDUSD trades .6904 last.