- Crude oil prices remain at a high after Iranian missile attack
- USD forex trading markets have generally regained stability
- Markets remain poised for Presidential statement on Wednesday
The beginning of 2020 has seen a speedy escalation of geopolitical tensions between the U.S and Iran. Marked by the assassination of miltary leader Qasem Soleimani on January 3rd by the United States in Iraq, the latest twist in the tale just hours ago has seen Iranian retaliation. This has come in the form of a targeted attack on 2 air bases in Iraq which are home to American troops. This briefly rocked the USD forex market and has impacted global oil prices significantly.
Surge in oil prices to record highs
During early trading, the prices of crude oil increased sharply to around the $69 mark at the time of writing. This represents their highest point in more than six-months and should be widely expected given the importance of the region when it comes to the global oil industry and markets.
The fear within markets is that one of the busiest oil shipping passages in the world, the Strait of Hormuz, could be disrupted if the current situation between the two nations continues to deteriorate. Market uncertainty is also not helped by the fact that the next moves of the U.S. in relation to today’s missile strike remain unknown.
USD/JPY and forex market beginning to regain composure
The global forex market also felt reverberations from the Iranian retaliation earlier today. In particular the safe-haven status of the Japanese Yen, well-known among forex margin traders, rang true yet again as many engaged in a flood of risk aversion trading in the immediate aftermath of the missile attack. This led the pair to trade at 3-month lows below 108.00.
At the present moment, traders appear to have calmed and this market has returned to the mid-108 range. The gold market, another safe-haven favorite, has also dropped back slightly but is still holding on to some of it’s gains from earlier in the day. Major forex currency pairs and indices from around the world are also licking their wounds and making a slow recovery during the early trading across Europe. The Euro, British Pound, and Swiss Franc have all found their composure and return to a somewhat normal trading range for the day.
Next moves awaited with anticipation around the world
Many commentators have referred to this as the biggest outside threat and test of President Trump’s reign to date. The fact that no immediate announcement was made in haste, may have done something to help the global markets return to calmer waters.
With the promise of a Wednesday morning US Eastern Time announcement to address the crisis though, is sure to bring with it another rollercoaster day and an amount of uncertainty moving toward the weekend. Considering the current climate and decision making process, there is no educated way to guess how that announcement may play out and what it will bring for the forex market and the nation.
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New Restrictions Hurt GBP Forex Market as US Pledges More Aid
- GBP Had Started Stronger on Positive Rates News
- Mixed Opinions From US as Powell Pledges Support
- Markets Continue to Struggle With Second Wave Fears
The Pound has struggled to catch a positive break again today as the UK announce new restrictions to curb the spread of COVID-19. The GBP forex market has struggled for some time to break back to anything high of $1.30 against the Dollar. There were mixed messages too in the US with differing approaches supported the Fed Hierarchy. Meanwhile, markets opened higher, but remain weighed down by fears of a returning coronavirus.
Pound Bounces Back to Tough Position
There was an early boost on Tuesday for Sterling. The currency had originally jumped on comments from the Bank of England Governor Andrew Bailey which dispelled the thought of negative interest rates which many fear have been under consideration. This boost in the forex market was short lived though. The Pound was sent back in the opposite direction by an announcement from leader Boris Johnson that new restrictions will be imposed.
Those forex trading the market remain poised to hear exactly what these new restrictions will be. The exact details are currently being laid out by Johnson, but they are to include increased penalties for non-wearing of masks, and the closure of hospitality venues from 10pm. These changes are being made at what the PM referred to as a “perilous turning point”, and are sure to further rock the currency and economy which has seen a host of troubles lately.
Not All Agree as Powell Pledges Continued Support
Chief of the Federal Reserve Jerome Powell backed up his previous stance strongly on Tuesday in comments to the House Financial Services Committee. He said the Fed “remains committed” to the long-term support of the economy, and will use all their available tools to do so. He noted that although the economy had started to pick up, the road ahead remains vastly uncertain. His tone was one which did not rule out more support, noting that the Fed will continue its support for “as long as needed”.
This sentiment was not echoed by everyone though. There was a different view from Federal Reserve Bank of St. Louis President James Bullard. He is of the opinion, along with several others, that the economy now has enough momentum to get back on its feet even without further economic stimulus.
Markets Open Cautiously Again
US markets have endured a very tough September so far. This challenge only intensified on Monday with another large scale sell-off. The Dow Jones suffered its worst day of the month, while the S&P 500 shed more than 1% en-route to a fourth consecutive losing day.
Forex brokers were not alone in feeling a slight return to form on Tuesday. The major indices climbed a little higher on the opening bell, hopes being held that the slump is over. The next moves though will be largely driven by the news on coronavirus cases, and any further financial aid.
Forex Market Majors Down Further Amid Fiscal Uncertainty
- EUR/USD at Monthly Low as Fed Remain Hesitant
- Pound Falls Further on Negative Rates Possibility
- US Jobless Numbers Drop Lower Again
The EUR/USD continued to fall on Thursday. Hitting its lowest point in one month, the market seems to be heading on a downward trajectory as there was no rush to further stimulus despite a grim economic outlook from the Fed. The GBP also continued to struggle lower on news from the Bank of England that negative rates remain under consideration. In the US meanwhile, although the number of jobless claims fell more than expected, the total still remains challengingly high.
Dollar Strength Returns as Euro Falls
Demand for the US Dollar has rebounded slightly todays as the Euro has continued to slip back against the currency. The pair has now reached its lowest point in a one month period with forex brokers projecting a further battle ahead. This comes in the wake of the FOMC meeting, and comments from chief of the Federal Reserve Jerome Powell that although more fiscal support may be needed, nothing in particular seems to be forthcoming from the Fed at this moment.
The Fed reluctance to add any more stimulus, coupled with the poor retail sales figures showcased for August in the US would appear to have pushed those forex trading the markets, back toward the relative safety of the Dollar. Though this may be no bad thing for the struggling Greenback, it leaves the Euro in a tentative position with many already seeing it as largely overbought.
Brexit Trade Hope Balances Struggling Pound
News that the Bank of England are looking into the possibility of setting negative interest rates to stimulate the economy of the UK made sure that Sterling started off the day with added woes. The Pound bounced back slightly though on news that a Brexit trade deal may not be as dead in the water as was previously expected.
Though the EU and UK have both been at loggerheads during the trade negotiations and with no positive resolution in sight, news emerged today that the UK has offered some concessions on fisheries to the EU. This has prompted the EU chief negotiator, Michel Barnier to say that he still believes a deal can be done. This though, would still appear a long way from certain.
US jobless Claims Slightly Lower Than Expected
Initial unemployment claims continued to trickle down for the last week in the US. Coming in at 860,000 the number of new claims slightly beat estimates, with the number of continuing claims also falling. This number still remains staggeringly high though at 12.6 million.
The general consensus is, that while the numbers are continuing to fall slowly, indicating that more and more people are getting back to work, the numbers remain too high, and falling at too slow a pace to really boost the economy. This is another factor which has backed a push back into the US Dollar as much of the road ahead remains still unknown.
Strong Chinese Data Helps Boost Forex Market Mood
- Positive Chinese Retail Data Reported
- Global Markets Boosted on Positive News
- GBP Stalls Again on Unemployment Numbers
The forex market, and others around the world have been given a strong boost today with the release of positive retail spending numbers from China. The numbers reported show the first increase of retail sales on the previous year. This has given a timely boost of strength to equity markets in China, Europe, and the US as well as some of the major forex pairs. The only major currency which has not been boosted in the right direction today is Sterling as it continues to struggle under the weight of Brexit woes.
First Chinese Retail Sales Boost
For the first time this year, monthly retail sales in China outpaced figures from the previous year. August numbers showed a 0.5% increase on those from the same period last year. This shows that China is getting back to regular life, and spending habits. This represents a sharp turnaround on numbers that had been lagging 8.6% below the previous year based on the first eight months.
These key numbers not only provide confidence to the Chinese markets, but a confidence which radiates through the economic world, such is the power of Chinese consumers. Some market sectors in particular showed a notably sharp increase, such as auto sales which were up almost 9% for the month. Industrial production numbers also increased an impressive 5.6% compared to the same month last year.
Timely Boost for Markets Worldwide
Those forex trading the different markets around the world welcomed the positive news from Beijing with open arms. This was noted on markets not limited to forex. The Euro moved toward 1.19 despite upcoming Fed policy decisions to be announced Wednesday. The currency was buoyed not only by the Chinese data, but also similarly positive figures from the German ZEW survey as confidence returns slowly to the bloc.
Meanwhile, as the US Dollar toils in weakness, equity markets in the US opened strongly. This follows similar movements in both China, and across Europe. The Dow Jones opened up more than 150 points while other major indices followed suit. Major names like Apple, Microsoft, and Amazon all gained, while Tesla has bounced back in huge style, adding 17% since the start of the week.
Sterling Bucks the Positive Trend
Forex brokers, while noting an increase in activity for other major pairs, found the GBP still lagging behind despite the all-round market positivity of the day. The Pound although picking up slightly, has refused to break by through the 1.30 mark even amid a continuingly weak US Dollar.
Trading appear cautious as the unemployment rate in the UK rose to 4.1% although jobless claim numbers were below expected. Still the greatest weight on the currency is the hugely controversial Brexit bill. This has seen the EU threaten legal action, and placed a great degree of uncertainty around both Brexit, the GBP forex market, and wider UK economy.