Pound Climbs After Inflation Tempers Risk of a Rate Cut

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The pound rose after inflation accelerated, fueling expectation that the Bank of England will hold off lowering interest rates for the foreseeable future.

Sterling cemented its position above $ 1.30, snapping two days of declines versus the dollar after annual inflation picked up for the first time in six months. The currency has also been given a boost by the prospect of greater public spending in a budget next month.

The strengthened 0.2% to $ 1.3018 as of 9:36 a.m. in London. Gilts were little changed at 0.61%, as were money markets, which are pricing in a 76% chance of an interest rate cut this this year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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ForexLive Americas FX news wrap: Risk trades battered on virus fears

Forex news for New York trade on January 31, 2020:

Markets:

  • Gold up $ 13.50 to $ 1587
  • WTI crude down 53-cents to $ 51.61
  • S&P 500 down 58 points to 3225
  • US 10-year yields down 7.7 bps to 1.51%
  • JPY leads, AUD lags

The ebb and flow of the risk trade is tough to predict at the moment. There wasn’t anything particularly new or troubling in the coronavirus story today but we hit some kind of tipping point and risk trades wilted.

It didn’t start out that way with the S&P 500 opening down 7 points and economic data having little effect. From there it slowly fell apart, perhaps on fear about what might come out over the weekend.

Part of the reason is that bonds continue to send a negative signal. All the dips in bonds have been bought aggressively this week and US 10-year yields are now below Fed funds at just 1.50%. The 30-year also dipped below 2% on Friday.

USD/JPY is the loser as yield fall and the pair sank 60 pips. The low was at the London fix but we barely bounced at any point afterwards.

EUR/USD was the beneficiary of some month-end flows, especially around the fixing but there’s also a case for unwinds of euro-funded carry trades, similar to the yen. It posted an impressive day, climbing 63 pips against the dollar and matching the yen.

Today was Brexit day in the UK and while that was priced in a long time ago, it was a politically significant event. The pound was higher and that will surely lead to some saying the exit was the reason but the BOE’s surprisingly hawkish stance is a bigger part of the equation.

Commodity currencies struggled once again but AUD and NZD held the Asian lows against the dollar. However there were marginal new lows (which are three-month lows) against the yen. The Canadian dollar was under more pressure despite a better GDP print. Some of that was the continued fall in oil, which touched the lowest since early October.

Forex news for New York trade on January 31, 2020:

Have a great weekend and thanks to everyone who sent us tips and news this week, especially our friends in China. Next week should be a rollercoaster with Chinese markets set to reopen.

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ForexLive European FX news wrap: Mixed feelings on risk

Forex news from the European morning session – 29 January 2020

Headlines:

Markets:

  • JPY leads, NZD lags on the day
  • European equities a little higher; E-minis up ~0.4%
  • US 10-year yields down 2.4 bps to 1.632%
  • Gold up 0.3% to $ 1,571.37
  • WTI up 0.6% to $ 53.80
  • Bitcoin up 2.6% to $ 9,285

EOD 29-01
It is all about the risk mood in trading today as markets continue to have mixed feelings about things as they have to deal with coronavirus concerns and Wall Street earnings – not to mention the FOMC meeting coming up later in the day as well.

Risk was keeping more steady earlier on – helped by Apple earnings after the close yesterday – but that diverged during European morning trade.

As European stocks and US futures keep higher, bonds were sending a different message as yields fell and major currencies took their cue from the bond market instead.

AUD/USD was keeping higher around 0.6770 after more steady Australian inflation data but fell to 0.6745 on the softer risk turn during the morning.

Meanwhile, USD/JPY also eased from 109.20 to 109.00 before keeping just above that currently. The dollar also held more firm as it pushes slight gains against the likes of the euro and pound with EUR/USD near 1.1000 and GBP/USD near 1.3000.

Looking ahead, market participants will continue to have to try and deal with the mixed situation ahead of the Fed later today.

The latest coronavirus headlines suggest that China Q1 growth may fall below 5% and on the earnings front, Boeing disappointed by announcing cuts to its 787 production rate; pre-market shares are dragged lower as a result.

But on the latter topic, just be wary that we still have key tech earnings still to report later in the day so that will be one to watch with regards to equities sentiment.

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Forex – Dollar Edges Higher; Loonie Downside Risk as BoC Meets

© Reuters.  © Reuters.

Investing.com – The U.S. dollar edged higher Wednesday as traders took a calmer view of the emergence of the pneumonia-like virus in China, but its gains were minimal and caution was still abundant.

At 04:10 ET (0910 GMT), the Futures, which tracks the greenback against a basket of other currencies, was up 0.1% at 97.42. The yen dropped 0.1% against the dollar, with trading at 109.97. traded 0.1% at 1.1079 and at 1.3043, down 0.1%.

As of early Wednesday, Chinese authorities confirmed that at least nine people, all in Wuhan, have died after contracting the virus and a total of 15 medical personnel have been infected.

“The obvious comparison people are making is with the SARS. While we still don’t know how lethal the new virus will be, my sense at the moment is that markets are not taking it as dire as SARS,” said Kyosuke Suzuki, director of currencies at Societe Generale (PA:), in a Reuters report.

“Back then, virtually every company was banning travel to Hong Kong. We haven’t seen that kind of reaction yet,” he said.

The 2002 SARS pandemic resulted in more than 8,000 people across 37 countries being affected, with around 800 deaths.

Looking ahead, the Bank of Canada holds a rate-setting meeting later Wednesday, markets are widely expecting no changes in the policy rate.

However, the Canadian dollar has downside risk on the back of this meeting, according to Francesco Pesole, an analyst at ING, in a research note.

“Investor sentiment around the prospect of BoC easing has shifted significantly in the past few months,” he said. But “we suspect that a downward revision to the GDP forecasts .… may be on the cards. With any significant change in the monetary policy stance unlikely for now, those projections have the potential to determine most of the market reaction.”

At 04:05 AM ET (0905 GMT), traded at 1.3077, up 0.1%.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Aussie, Kiwi shine as risk appetite returns; dollar firm

© Reuters. FILE PHOTO: Illustration photo of Australian dollars © Reuters. FILE PHOTO: Illustration photo of Australian dollars

By Saikat Chatterjee

LONDON (Reuters) – The Australian dollar and its New Zealand counterpart led gains among major currencies on Friday as easing geopolitical tensions prompted investors to buy riskier currencies with relatively upbeat U.S. economic data this week also benefiting sentiment.

The greenback held firm against a broad basket of its rivals and is on track to post its best week in two months as the prospect of war in the Middle East ebbed as the United States and Iran backed away from further confrontation.

“Risk sentiment is back on thanks to easing geopolitical tensions and hopes of an interim trade deal between China and the U.S. as early as next week,” said Manuel Oliveri, a currency strategist at Credit Agricole (PA:) in London.

The gained a third of a percent to $ 0.68755 though strength were curbed on rising bets of an interest rate cut as early as February due to weeks of bushfires that have cast a shadow over the broader economy. [AUD/]

The dollar also edged up 0.2% to $ 0.6622.

On a weekly basis, though, the greenback has broadly outperformed in the G10 FX space thanks to strong data this week, with data showing a pick-up in the U.S. service sector, falling joblessness claims and solid private hiring.

The data has also put a floor under a recent shrinking of interest rate differentials between U.S. and European bonds, with spreads between U.S. Treasuries and equivalent German debt for 10-year maturities trading near 210 bps.

“There’s nothing fundamental to drive people out of the U.S. dollar at this stage,” said National Australia Bank’s head of FX strategy, Ray Attrill.

Against a basket of its rivals (), the greenback gained 0.6%, its biggest weekly rise since early November. It held firm at 97.44 on Friday.

Moves in other major currencies were modest on Friday, with traders focused on December job-market data due at 1330 GMT. The consensus forecast is for 164,000 extra jobs in December, following a bumper 266,000 added in November.

Another strong performer this week has been the , which has climbed to a five-month high, despite the geopolitical turbulence, on growing optimism as the Jan. 15 date for signing the Sino-U.S. trade deal nears.

It last traded at 6.9315 per dollar CNY=.

U.S. President Donald Trump, who announced last month that the Phase 1 trade deal with China would be signed on Jan. 15, said on Thursday the agreement could be signed “shortly thereafter”.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex – Yen Slips as Risk Appetite Bounces Back on Trump’s Remarks; U.S. Dollar Fl

© Reuters.  © Reuters.

Investing.com – The Japanese yen slipped on Thursday in Asia as safe-haven demand faded after U.S. President Donald Trump signalled de-escalation in conflict with Iran.

The that tracks the greenback against a basket of other currencies last traded at 96.985 by 1:30 AM ET (05:30 GMT), down 0.01%.

Earlier this week, the Islamic Republic launched several rockets against U.S. airbases in Iraq in response to a U.S. airstrike that killed a top Iranian general last week.

In response to the attacks from Iran, Trump said the U.S. “will immediately impose additional punishing economic sanctions on the Iranian regime.” The sanctions would remain in force until Iran changes its behavior, he added.

The decision from the president to opt for sanctions rather than military response sent safe-haven assets down, while stocks and other risk assets recovered.

The pair was up 0.1% to 109.26.

The pair gained 0.2% to 1.3119. Prime Minister Boris Johnson told European Commission Chief Ursula von der Leyen that the U.K will not extend its transition out of the European Union beyond December 2020, raising fears that the U.K. could still exit the EU without a deal at the end of the year.

Leyen warned that “without an extension of the transition period beyond 2020,” an agreement on a new trade deal would be a risk.

Meanwhile, the pair and the pair both inched up 0.1%.

The pair dropped 0.3% to 6.9247. China’s National Bureau of Statistics reported that the country’s rose 4.5% last month from a year earlier. The median forecast was for a 4.7% increase.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Swiss franc holds gains versus dollar on U.S.-Iran risk

By Stanley White

TOKYO (Reuters) – The Swiss franc held gains against the dollar on Tuesday as traders sought save-havens amid heightened anxiety about potential Iranian retaliation to a U.S. drone strike that killed its most prominent military commander last week.

The yen, another safe-haven currency, pulled back from a three-month high versus the dollar, but sentiment remains fragile due to the increasing worries about armed conflict between the United States and Iran.

Highlighting the concerns, the U.S. currency nursed losses against sterling and the euro as the emergence of a new geopolitical flashpoint led some investors to reassess their tolerance for risk at the start of the new year.

“Sentiment clearly favors risk-off trades, but dollar/yen is not falling much because Japanese importers are buying,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“Excluding this real demand, the dollar is weak against other currencies. This reflects the situation in the Mid-East, but we need to see what happens next.”

Against the dollar, the Swiss franc was quoted at 0.9679 following a 0.5% jump on Monday toward its highest level in more than a year.

The yen was steady at 108.42 per dollar, off a three-month high of 107.77 touched on Monday.

The () against a basket of six major currencies stood at 96.623, following a 0.2% decline on Monday.

The United States has no plans to pull its troops out of Iraq, Defense Secretary Mark Esper said on Monday, following reports by Reuters and other media of a U.S. military letter informing Iraq officials about the repositioning of troops in preparation to leave.

This came after Friday’s drone strike in Baghdad ordered by U.S. President Donald Trump that killed Iranian military commander Qassem Soleimani, widely seen as Iran’s second most powerful figure behind Supreme Leader Ayatollah Ali Khamenei.

The U.S. government says Soleimani was actively developing plans to attack U.S. interests in Iraq and the Middle East. Iran’s leaders have promised to avenge the killing.

The United States and Iran, or its proxies, have clashed in some form or another for decades over political and military influence in the Middle East.

Elsewhere in the currency market, the pound traded at $ 1.3170, following a 0.7% jump on Monday. The euro () was quoted at $ 1.1196 after a 0.4% gain in the previous session.

, another safe-haven asset, traded at $ 1,564.16 per ounce, just below a near seven-year high of $ 1,579.72 reached on Monday. [GOL/]

Investors await data due later Tuesday on the U.S. trade balance, factory orders, and the services sector to measure the health of the world’s largest economy.

The United States and China are expected to sign a preliminary deal on Jan. 15 to de-escalate a prolonged trade war, but rising geopolitical risks threaten to overshadow the benefits of reduced trade friction.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Risk Currencies Reel as Geopolitical Shock Spoils New Year Cheer

(Bloomberg) — The new year has barely begun and global markets are already under threat from a geopolitical flare-up that few saw coming, and that’s hurting risk-sensitive currencies such as Sweden’s .

The Scandinavian currency was set for worst week against the since early November amid escalating tensions in the Middle East after a U.S. airstrike killed a top Iranian general. The krona had staged a dramatic recovery in the final quarter of 2019 — rallying about 5% — as the Riksbank exited almost half decade of negative interest rates.

With Iran’s threat of “severe retaliation” raising fears of an armed conflict in the Middle East, investors may be in for more volatility than they were ready for. That’s undermining the optimism that has been building in recent weeks for brighter economic prospects in 2020, with the U.S. and China now headed for a trade truce and the U.K. looking set to avoid an immediate chaotic exit from the European Union.

“The timing of the latest escalation of the tensions between the U.S. and Iran is unfortunate,” said Valentin Marinov, head of G-10 currency research at Credit Agricole (PA:) SA in London. “It could trigger unwarranted tightening in the global financial conditions and dash market hopes for a rebound of the global economy that is still to emerge from under the cloud of the U.S.-China trade war. Risk sentiment should remain fragile.”

The krona was down 0.7% this week at 9.4059 per dollar as of 2:10 p.m. in London, on track for the biggest five-day loss since the period ended Nov. 8. The Swedish currency reached 9.2949 on Dec. 31, its strongest level in six months. The and dollars dropped around 0.5% each this week. The led gains Group-of-10 peers on haven bids, with an advance of 1.2% against the dollar.

While key economic data such as services-sector figures from Europe and trade and payrolls reports from the U.S. will be in focus next week, geopolitics may continue to overshadow them.

The “geopolitical wind blows against the tide of economic data,” Societe Generale (PA:) SA strategist Kit Juckes wrote in a client note. “In foreign-exchange markets, safe havens and oil-sensitive currencies benefit but it’s the yen which is the clear winner.” He also recommended betting on Sweden’s currency weakening against the Norwegian krone.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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The two major risk factors in markets for 2019 will still be there in 2020

US-China trade and Brexit worries will not go away despite some improvement in their respective rhetoric at the moment

We’re getting closer to a Phase One trade deal and Boris Johnson just won big in the UK election last week. Two of the biggest risk factors that has plagued markets this year appear to be finding some form of conclusion, but are they really?

US-China trade war

US-China
As great as the Phase One trade deal is and will be, it isn’t the “be all, end all” deal that will see US-China relations significantly improve.

This is merely a temporary ceasefire at best and at worst, it’s just a delusion to keep some hope that both sides are not yet ready to engage in a full-blown trade and geopolitical war.

The Phase One deal will include tariffs rollback by the US in exchange for China purchasing more farm products – to try and reach $ 40 to $ 50 billion annually – as well as some “firm” commitments on technology transfer, currency and opening up of its economy.

The catch here is that it will include some subjective way of determining how both sides will live up to their respective end of the deal. That tells me that ultimately, this will eventually lead to either one of them calling the other out when the time is right.

As such, don’t expect the hostilities and trade worries to die down just because the Phase One deal has been signed – if it even does that is. This is a worry that will haunt markets for many more years to come and 2019 is but a taste of what it can be like.

Brexit

Boris Brexit
Boris Johnson got his much sought after majority in parliament – quite comfortably as a matter of fact – and now he can get his Brexit deal across the finish line. Easy-peasy.

Sadly, this is just merely the starting point in the whole Brexit process.

Once Johnson gets his deal through the legislative hurdles in parliament in January next year, he will have to then go on to negotiate a future trade relationship with the EU.

And for the uninformed, they will only have until the end of next year to finalise a deal and to try and implement it thereafter. Otherwise, the UK will leave the EU without a deal.

Yes, a no-deal Brexit is still on the table as long as the UK and EU cannot agree to a trade deal during the transition period next year.

That can still be avoided though if the UK requests an extension to the transition period before July next year. However, Johnson has categorically ruled that out repeatedly over the past two months in what looks to be a gambit to pressure EU leaders during talks.

We’ll see how all of that plays out but it is clear as day that both sides won’t get a deal done before 31 December 2020. That is all but a pipe dream.

As such, we will have to see if Johnson will find it sensible to negotiate further in the coming years – prolonging the Brexit uncertainty – or opt to crash out of the EU without a deal, wasting all the time we have spent extending the Brexit deadline since March.
ForexLive

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ForexLive European FX news wrap: Risk slumps as Trump sees no deadline for trade deal

Forex news from the European morning session – 3 December 2019

Headlines:

Markets:

  • GBP leads, EUR and CAD lag on the day
  • European equities mixed; E-minis down 0.3%
  • US 10-year yields down 2.8 bps to 1.791%
  • Gold up 0.4% to $ 1,468.59
  • WTI down 0.3% to $ 55.81
  • Bitcoin down 0.4% to $ 7,287

EOD 03-12
Markets were initially more steady to start the day with the yen sitting a little weaker and the likes of the aussie and kiwi underpinned. The latter was helped by the RBA keeping its cash rate steady but things all changed when Trump started speaking in London.

Trump mentioned that a trade deal with China has ‘no deadline’ and could even come after the US election next year and that set off a wave of risk aversion across markets.

USD/JPY slipped from 109.10 to 108.81 as bond yields also fell across the curve. US futures erased gains to fall as much as ~0.4% before finding a bottom for the time being.

That said, the risk mood remains more glum than when we started the session and it’s more of a case that traders are seeing things from a perspective that the glass is now half empty rather than the glass being half full earlier today.

As such, AUD/USD eased up on gains falling from 0.6862 to 0.6840 levels with NZD/USD also scaling back a bit from 0.6533 to 0.6510 levels.

The pound though continues to stay perky amid some mild softness in the dollar with cable threatening a break of the 1.3000 handle. A UK opinion poll continues to favour the Tories ahead of next week’s vote and that isn’t hurting sentiment whatsoever either.

Looking ahead, it’s still largely about the risk mood as markets will have to digest Trump’s comments and how that will factor into overall trade negotiations as well as the implications for the US economy going into next year.

Other than that, I would say be wary of cable running stops above 1.3000-10 as buyers continue to look poised in chasing an upside break.

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