The buck weakened across the European session and into New York trade yesterday. Markets were initially on the back foot following a tumultuous weekend of provocative headlines regarding US/Iran/Iraq tension. However, once traders and dealers settled in, realisation struck that the prospect of a full-blown war is still far off.
Risk-off favoured assets reversed their losses with the Japanese yen and Swiss franc being sold while the greenback was also sold for likes of the pound and euro. Stock markets trimmed their steep losses while oil pared its gains. The situation is still a negative for markets, but it appears they have already come to accept this potential risk and are now speculating on no further escalation. On balance, it’s fair to say this situation, sadly, has room to get worse before it gets better.
On the data front today, eurozone inflation (consumer price index) and retail sales will cross news wires at 10am. In addition the US will also release some tier 1 numbers in the afternoon, these are in the form of durable goods and non-manufacturing ISM.
Written by Viv Savani. 8:25am, January 7th 2020
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