Forex news from the European morning session - 7 January 2020
Headlines:
- Eurozone December preliminary CPI +1.3% vs +1.3% y/y expected
- Eurozone November retail sales +1.0% vs +0.7% m/m expected
- UK plans increased gilt sales for the current financial year 2019/20
- More details on Iran's reported retaliation 'scenarios' against the US
- Iran is said to be assessing 13 retaliation 'scenarios' against the US
- Iran lawmakers reportedly approve bill designating Pentagon as terror group
- Here is a central bank that is struggling to stop further appreciation in its currency
Markets:
- USD leads, AUD lags on the day
- European equities higher; E-minis up 0.2%
- US 10-year yields down 1 bps to 1.798%
- Gold up 0.2% to $1,568.16
- WTI down 0.8% to $62.75
- Bitcoin up 4.6% to $7,929
There were decent moves in major currencies on the session as markets continue to look past US-Iran tensions despite some cautious headlines in the European morning.
Iran's Supreme National Security Council is said to be assessing 13 retaliation 'scenarios' against the US and warned that even the weakest one will cause a 'historic nightmare'.
That led to some mild risk aversion with US futures turning flat and bond yields easing a little. USD/JPY also slipped to a low of 108.26 from 108.37 but the softer risk sentiment was quickly faded as markets are more accustomed to Iranian threats over the past few days.
The main focus instead was on the aussie as the currency extended its fall from Asia Pacific trading amid worries about the domestic outlook, with RBA rate cut odds increasing alongside talk about QE and pessimism surrounding recent economic data.
AUD/USD fell from 0.6925 to 0.6905 to start the session before breaking below its 200-day moving average and the 0.6900 handle in a drop to 0.6870 as the dollar also held firm.
A drop to five-month lows in AUD/NZD certainly didn't help the aussie's plight but the kiwi is also dragged lower from 0.6665 to 0.6640-50 levels seen currently.
As the greenback held more steady, the euro also eased lower from 1.1185 to 1.1165 after euro area data met expectations. Buyers held on to the 200-hour moving average for support as price now climbs back up towards 1.1180 levels.
The pound was also one of the more active currencies as it caught a bid in a quick move from 1.3170 to just above 1.3200 - with some analysts/traders citing an increase in gilt sales and fiscal support as the reason for the move.
However, the pound failed to keep gains above the figure level and with the dollar and yen maintaining more steady footing, the quid fell back lower with cable now seen at 1.3130.
In broader markets, oil is staying lower while gold is keeping more steady after its overnight drop as traders and investors continue to fade the tensions in the Middle East.
As mentioned earlier, unless we see some escalation in military action between the US and Iran, it is likely markets will continue to keep a blind eye on the current situation and lean towards focusing on other areas instead.
