EUR Eyes 1.15, GBP Volatility to Return - US Market Open

2019-01-07 14:40:00

MARKET DEVELOPMENT – USD ON THE BACKFOOT AS MARKETS CONTINUE TO DIGEST DOVISH POWELL

USD: The US Dollar is on the backfoot to begin the week as markets continue to digest the latest dovish commentary from Fed Chair Powell, who signalled that the central bank could either slow or pause rate hikes. As such, despite Friday’s strong US jobs report, the USD continues to underperform against its major counterparts. However, while the peak in the USD may have been seen, the fact that markets are pricing in cuts for the Federal Reserve could be too pessimistic and thus prevent the USD seeing sharp decline in the near term. Much of the focus for this week will be on trade talks between China and the US, in which US Commerce Secretary Ross has noted that

EUR: The Euro is among the best performers on the back of the USD weakness, while the continued narrowing in US/German 2yr spreads have continued to provide support. As such, EURUSD is back to familiar resistance levels with the pair eyeing the 1.15 handle. However, negatives remain for the Eurozone, with the latest German factory orders seeing its largest decline since August 12th.

GBP: With UK politicians back from recess, Brexit headlines have once again picked, which will see GBP volatility return. UK Press reports stated that the Brexit vote will take place on January 15th. However, thus far, there has been little to suggest that PM May’s deal will pass the meaningful vote.