Early 2020 volatility gives way to “risk on”

Intermediate
  • As we highlighted in last week’s MacroWatch, the bullish sentiment that started 2020 was significantly damaged by the increase in geopolitical risks from the U.S. airstrike that killed General Qassem Soleimani, the Iranian Quds Force chief.
  • Moreover, global stock averages plunged lower in the middle of last week as Iran retaliated with airstrikes aimed at U.S. troops in military bases in Iraq.
Iran US Conflict
  • This also saw the safe haven Japanese Yen surge (sending USDJPY and Japanese Yen Forex cross rates significantly lower), with a flight to quality also into Gold, sending the precious metal to multi-year highs, whilst Oil unsurprisingly also spiked higher.
  • The Australian Dollar and New Zealand Dollar, seen as “risk currencies” sold off with the stock markets.
  • However, it transpired that there were no U.S. casualties, that Iran had forewarned of the attacks and targets.
  • In addition, both Iran and Donald Trump have appeared to look to a cessation in any further escalation, both making somewhat conciliatory statements.
  • This saw riskier assets surge back higher Wednesday, with global stock averages moving to or close to multi-month and multi-year cycle highs, whilst US share indices hit new records at the end of the week.
  • USDJPY surged back higher, close to multi-month highs and the 110.00 level, whilst Gold and Oil retreated.
  • On the data front, the global Markit Purchasing Managers (PMI) data last week broadly beat expectations for the major global economies, whilst the U.S. Institute of Supply Management PMI data was also better than the consensus.
  • Friday’s U.S. Employment report was mildly disappointing, which saw stock markets in the US and globally dip back modestly from recent cycle highs.
NFP
  • A late week development in the U.S. impeachment process as the trial is likely to be set in motion next week, with expectation that the House will transmit articles of impeachment to the Senate.
  • As we have continued to stress, however, a two-thirds majority of Senators is required to convict Trump on either of the two articles of impeachment, which is unexpected given the Republicans’ firm control of the Senate.

Key this week

  • The geopolitical focus will remain on and developments in the Iran-US conflict and the expected developments for the US impeachment trial agenda.
  • We get the signing of the US-China phase one trade deal on Wednesday, though market impact is likely to be negligible.
  • Central Bank activity is very light, mainly focusing on Fed speakers through the week.
  • On the data front we have numerous CPI reports with the US release probably most important on Tuesday. The other standout release is the US Retail Sales on Thursday.
  • Plus, we also get Chinese trade data Tuesday with Chinese Industrial Production and GDP Friday.
Date Key Macroeconomic Events
13/01/20 UK Manufacturing & Industrial Production and GDP
14/01/20 China Trade data, US CPI
15/01/20 UK CPI, EU Industrial Production, US PPI, US-China Phase One Trade Deal
16/01/20 German CPI, US Retail Sales
17/01/20 China Industrial Production and GDP, UK Retail Sales, EU CPI, US Industrial Production, US Michigan Consumer Sentiment Index

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

Comment on this video

Your email address will not be published. Required fields are marked *


Latest Related News

US Dollar stays firm, aiming higher

Pound respects major resistance (GBPUSD)Euro breaks down (EURUSD)Positives appear in Dollar-Yen, as it de-correlates from equities (USDJPY) Continued

USDJPY aiming back lower (USDJPY forecast)

Global financial markets have shifted back to more of a “risk off” phase since the start of Q2 into April, with stock averages lower (see our recent reports on the DAX and S&P500 ).In turn, this “risk off” phase has seen broader US Dollar strength resuming, except against the Yen, with the safe haven Japanese currency probing lower against the US Dollar.Despite a small USDJPY… Continued

Dollar reverses, breaks key support (DXY)

Euro breaks up (EURUSD)Pound hits major resistance (GBPUSD)Dollar-Yen refuses to rise with equities (USDJPY) Continued

US Dollar surges in flight to quality; GBPUSD hits multi-decade low

The COVID-19 coronavirus continues to spread, with a global surge in cases and the inevitable fatalities.The still more aggressive spread of the virus in the UK, across European nations and also throughout the USA has seen multiple countries go into some form of lockdown, with restrictions on public movement and work from home rules enforced. Panic buying has broadened globally, reflecting fears amongst the general… Continued

Recovery efforts fading and further capitulation threats

The more aggressive, global spread of the coronavirus outside of China in early March has further increased concerns regarding a pandemic, notably with the spread of the virus in Europe and the US.The more aggressive spread in Italy, and the lockdown this weekend of 15 provinces in the country has highlighted the potential risks for other European countries, with the number of cases increasing throughout… Continued

Forex Brokers in your location