A respite for the Greenback

Stephen Innes SPI Asset Management

Despite a break from the incessant waves of US dollar selling, there remains a skittish overtone in the currency markets as the fear of the unknown set’s in with US political uncertainty accentuating the current market unease. Treasuries traded down after a consensus PCE, but market sentiment quickly shifted driving prices up and yields down, as the market again emphasises the US political morass.

The US political crater and lack of fiscal stimulus from Washington will continue to be the primary catalyst for dollar declines. While the market is cautious about a possible USD risk reversal, searching for the key triggers are like looking for a black cat in a coal cellar.

US economic data had little impact on the December rate hike probabilities. But the fact remains investors believe the current political tumult in Washington will lessen the chances of another Federal Reserve rate hike in 2017

The perpetual Oil price roller coaster is adding to market jitters as WTI dropped 2.0% today on a Reuters report that OPEC production rose in July. Adding more fuel to the fire was the increase in US crude inventories reported by the American Petroleum Association at the end the NY session

Equities, on the other hand, continue to flourish as earning reports drive stocks to new highs. The Dow reached a new-all time high for a fifth consecutive session, nibbling at the key 22k mark

EURO

The Euro has traded marginally lower overnight but for the most part, has been trading sideways. The position overhang from month end activity with US payrolls around the corner has dealers adopting a more cautious tact as they look for more clues amidst the foggy US economic and political landscape.

Australian Dollar

While there was nothing particularly dovish in the RBA statement, there was also nothing that screamed AUD higher other than USD weakness. The Aussie has plunged lower overnight as the market is inferring that provided the currency remains elevated the RBA stays in the low-interest rate for the longer mode.

Japanese Yen

Very choppy session overnight as the Greenback traded with mixed sentiment. There was little news behind the overnight currency moves other than to speculate its a bout of nervous position nellies in summer thinned trading condition.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.