Daily Roundup – Markets review
There may be reports swirling of optimism over a US-China trade deal being struck but this doesn’t seem to be playing out in many quarters when it comes to currency markets. The bigger move over the weekend break appears to have been seen off the back of Donald Trump’s attest attack on Federal Reserve monetary policy, something which has served to drive the dollar lower across the board, although largely only on a temporary basis.
AUD/USD is languishing close to February lows, although if signs of a deal with China are seen then in theory this should be good both for the Yuan and also the Australian economy. As however has been noted there’s likely to be long term pressure weighing on the Aussie dollar on the basis that the RBA may need to affect a rate cut towards the end of the year. So long as presidential threats don’t start to manifest themselves at the Fed in terms of talk that Jerome Powell needs to move aside then this may be sufficient to keep the pair on a downward trajectory for some time yet.
Last week’s better than expected US Q4 GDP print continues to buoy USD/JPY and despite the test of 112 being only very short lived, there appears to be an expectation that another jump higher here could yet be seen. The fact the Yen isn’t benefitting from much of a safe haven draw right now could be seen as something of a surprise given rising tensions between India and Pakistan, although again suggests that hopes of normalising Japanese monetary policy may have taken another step back.
Sterling is finding renewed support against the Euro off the back of rising confidence over a Brexit solution being seen. Developments over the weekend have given some fresh boundaries to present in Brussels and this has been sufficient to overshadow the dip into contraction that was posted by the UK Construction PMI reading this morning. The Euro is also struggling across the board in light of pessimism over just how the ECB may act at their monetary policy meeting at the end of the week.
There’s an ascending triangle forming on GBP/USD, with a target of a return to last week’s highs around 1.3350 being eyed. However given the political backdrop in the UK at present, any GBP trade should be handled with caution.