Monday January 6th, 2020

Middle East tensions remains the markets primary focus and safe haven currencies continue to be attractive to investors. With markets back at full strength and no direct action from the Iranians, Eur & Gbp have both managed to rebound vs US$. Expect markets to continue to be cautious until there is more clarity over Iran’s potential next steps. In other news, the Sino/US phase one trade agreement is set to be signed on January 15th in the oval office. Intraday US Market PMI data and ME tensions will dominate the markets focus.

Oil hit $70 a barrel as US, Iran and Iraq tensions continue after the US air strike killed a top Iranian commander. C$ has rallied significantly on the back of stronger oil, hitting 3 month highs vs US$. 1.2780 is the next key support for C$ vs US$, last seen Oct 2019. Expect C$ to remain firm given the current ME tensions.

Euro rebounded from its lows on Friday from a combination of better than expected EU PMI data and Iran’s limited response. The markets focus remains on ME developments, but will also be watching a busy week for EU economic data. EU inflation data and unemployment data out this week will both be provide direction to the single currency. Mitigating any further buildup of ME tensions, Euro has the potential to rebound back towards mid 1.12’s this week.

Similar to Euro, GBP has managed to regain the ground it lost on Friday. Better than expected PMI UK data released today helped rally the GBP. GBP remains vulnerable to volatility with ongoing ME tensions and the countdown to leaving the EU at the end of the month. Brexit uncertainty will continue to weigh on the UK economy and will limit the pounds ability rally longer-term.