USD Higher at Start of the Week
The US dollar has had a firmer start to the week with USD index trading in the green over the European morning so far on Monday. Following initial weakness last week, USD stalled out and the index stagnated around the 97.11 level. This is still underpinning the market as support today. Looking ahead this week we have US CPI, retail sales and U. of Michigan confidence survey. These will all be watched closely now as the market looks to gauge the likelihood of further easing from the Fed.
Euro Heads Lower from Resistance
EURUSD has come under pressure over early trading on Monday with price backing further away from the 1.1217 level. This level capped price on several attempts last week and has now seen price trading back down to 1.1186 last. Recent data weakness in the eurozone is keeping expectations of ECB easing elevated.
GBP Sees Mild Bounce
GBPUSD has seen a mild recovery so far this morning though price remains below the 1.2073 level which was broken late last week. The growing risks of a no-deal Brexit in the UK, as well as the risks of a subsequent recession, are weighing on GBP sentiment heavily. UK CPI this week will be closely watchedgiven the bank’s warning that a collapsing GBP could cause inflation to run hot. This might be exacerbated should a no-deal Brexit come to pass, leading to the BOE potentially needing to raise rates instead of cut them. However, if recession risks are high, the bank will be in a difficult place to decide.
Risk assets have come back under pressure in early trading on Monday. Following the acute losses last Monday, the SPX500 was able to recover strongly over the week but lost momentum on Friday. For now, price is still sitting atop the 2908.55 level. However, if price dips below here, we could see downside momentum picking up once again.
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Gold & JPY Rally on Safe Haven Inflows
Safe havens have both been higher so far today. The growing risks of a US recession as a result of the ongoing trade war have seen both JPY and gold higher against USD. XAUUSD trades 1496.58 last with price sitting just below the recent 1510.42 highs. USDJPY is trading heavily so far today with price now testing the 105.24 2019 lows once again.
Trade War Fears Cap Crude
Oil prices have been a little weaker so far today as ongoing trade war fears have capped the recovery rally that took place over the second half of last week. Crude has been hard hit by escalating tensions between the US and China which raise severe doubts about the demand outlook into next year. The EIA last week reported an unexpected build in US crude stores which has also weighed on oil. Crude trades 53.71 last with price having reversed just ahead of the 54.90 resistance.
CAD & AUD Under Pressure
USDCAD has been higher today with a firmer USD and weaker oil prices weighing on CAD. USDCAD found support recently at the 1.3207 level which has since turned price higher again, trading 1.3241 last.
AUDUSD has been softer again today also as a firmer USD and general risk-off tone is weighing on the high beta currencies. While the RBA kept rates on hold last week, later in the week Governor Lowe said that further easing would likely be necessary in line with reduced growth forecasts in the RBA’s quarterly SoMP. AUDUSD trades .6765 last.