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MARKET DEVELOPMENT – USD to Post Worst Week in 3-Months

USD: US Dollar is recouping some of its losses, however, the index remains on track for its worst week in 3-months as global growth fears begin to plague the USD. As such, the USD is once again losing out to the safe haven Japanese Yen. Elsewhere, risk assets have been dented as President Trump comments that there could be a long government shutdown if Democrats vote no on the border wall. Political instability may be another factor impacting the USD as we head towards 2019.

EUR: As liquidity dries up heading into year-end, much of the price action in the Euro has been dictated by sizeable vanilla options. EURUSD failed to break higher with 2.1bln worth of options sitting at 1.15, as such, the pair are back down to the low 1.14s. Elsewhere, reports suggested that the ECB are beginning grow concerned over China’s potential slowdown, which would push back a rate hike by the ECB. As a reminder, current guidance suggests that rates will be kept at present levels till at least the end of Summer 2019. As it stands, markets have priced out a rate hike until 2020.

NZD: The Kiwi is underperforming after New Zealand reported the slowest growth figures in 5yrs at 0.3% for the Q3, which also missed analyst estimates. In turn, provides another indication that global growth is facing more headwinds, posing a risk to high FX (NZD, AUD). Consequently, this has also reduced NZ’s Economic Surprise Index to near flat, suggesting that recent resilience that the NZD had in the face of risk off sentiment may begin to ease.

USD Set to Post Worst Week in 3-Months, Trump Threatens Government Shutdown - US Market Open

Data as of 1250GMT

DailyFX Economic Calendar: Friday, December 21, 2018 – North American Releases

USD Set to Post Worst Week in 3-Months, Trump Threatens Government Shutdown - US Market Open

Four Things Traders are Reading

  1. JPY Winning Safe Haven Battle Over USD, Set to Continue in 2019” by Justin McQueen, Market Analyst
  2. EURUSD Price: Rally Running out of Steam Despite USD Weaknessby Nick Cawley, Market Analyst
  3. EURJPY Price Challenging Support Line, Losses May Follow if it Breaks” by Martin Essex, MSTA, Analyst and Editor
  4. FTSE Chart Analysis – Testing Support Amid Weak Trend” by Paul Robinson, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX