The avoidance of a US government shutdown, in addition to improved prospects of a US - China trade deal boosted Wall Street overnight. The Dow surged over 370 points, whilst the S&P climbed 1.3%. Positivity spilled across to Asia where stocks edged up to a 4-month high on Wednesday. European bourses are pointing to a strong start.

Trump saying that there could be some leeway with the March 1st trade truce deadline if the two sides were close to a deal was music to the ears of the market. Whilst there have been positive reports regarding the trade talks investors were getting nervous of the nearing deadline and no solid evidence of progress.  Negative sentiment is unwinding, and investors are showing that they are prepared to put risk back on the table. For sentiment to remain positive we will need to see evidence of a deal in March. However, for now markets are willing to let this pass.

Flows out of safe haven yen

Stocks were also on the front foot after a partial government shutdown was averted. A tentative deal on border security was not to Trump’s liking but the President also downplayed the likelihood of a second shutdown. With this headwind moving quickly into the rear-view mirror investors are moving their money out of safe havens and back into riskier assets. The dollar was broadly lower, except versus the haven yen which climbed over 110.50. The dollar is inline for its fourth consecutive day of gains versus the yen.

Dollar eases on improved risk sentiment & ahead of CPI

On Tuesday the dollar snapped an 8 day winning streak, falling 0.4% versus a basket of currencies. The dollar is once again falling in early trade on Wednesday as investors look ahead to US inflation data. Headline CPI is expected to have declined to 1.5% year on year in January, down from 1.9% the month previous. This would be the fourth consecutive month of falls. With the focus on geopolitical developments January CPI is likely to take a back seat to other drivers. A fall in line with expectation is therefore unlikely to cause any fireworks. Should we see a surprise to the downside, pressure on the dollar could ramp up quickly.

UK CPI figures are also due for release this morning. Inflation is expected to dip from 2.1% to 2% in January. Whilst inflation remaining at or around 2% is good news for the pound, the reality is that Brexit is driving sterling right now. Inflation data is likely to play second fiddle to Brexit headlines.

Oil extends gains

Oil was trading 1% higher in early on Wednesday, extending gains from the previous session. With OPEC confirming deep cuts in January and Saudi Arabia cutting above and beyond its agreed OPEC quota, oil bears are happy. Throw into the mix the US sanctions on Venezuela and suddenly supply is looking considerably tighter.

This information has been prepared by London Capital Group Ltd (LCG). The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. LCG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD remains depressed but off daily lows

The EUR/USD pair is recovering from a daily low of 1.1216, although holding in negative territory for the day. US preliminary Michigan Consumer Sentiment Index improved by less-than-anticipated in July, coming in at 98.4 vs. the 98.5 expected.

EUR/USD News

GBP/USD trading marginally lower daily basis but above 1.2500

The Pound gave back some of its Thursday’s gain on dollar’s relief. The GBP/USD pair broke a daily descendant trend line coming from June’s high and holds above it, leaving little room for sellers to act.

GBP/USD News

USD/JPY: bears pausing, still in control

Japanese National Inflation steady at 0.7%YoY in June. US Michigan Consumer Sentiment Index expected at 98.5 in July. USD/JPY corrective advance falling short of signaling an interim bottom in place.

USD/JPY News

Something has spooked the Fed

We wish we knew what it is. Wild talk of the US joining Japan and Europe with zero or negative return on the 10-year is or should be very frightening.

Read more

Gold consolidates around $ 1440, eyes US data for fresh direction

Gold (futures on Comex) extends its side-trend around the 1440 mark into the mid-European session, having stalled its retreat from 2019 highs of 1454 near 1437 region.

Gold News

Majors

Cryptocurrencies

Signatures