Tuesday January 7th, 2020

The lack of imminent actions within the Middle East has seen some unwinding of safe-haven currencies. Oil & Gold prices both slipped from their highs, whilst trade exposed currencies remain sidelined. The focus has begun to switchback towards the Sino/US trade agreement and economic data releases. The Phase one trade agreement is scheduled to be signed on Jan15th at the white house. US non-manufacturing PMI & US trade balance out later this morning will provide intraday direction. Markets will continue to monitor the ME tensions and any escalation will impact safe-haven currencies.

Oil fell almost 1.5% as concerns of ME oil supply disruptions eased since Fridays US drone attack. C$ has remained relatively resilient despite retreating oil prices and the US$ rebounding. The anticipation that the phase one trade agreement will be signed has kept C$ attractive to investors. The potential of a test of 1.2780 vs US$ (low Oct2018) remains intact for C$ within the current conditions.

The unwinding of safe-haven currencies will benefit Euro which is currently sitting just below 1.1200. Euro zone inflation data released this morning met expectations. Further easing of ME tensions could see Euro retest 1.1250 levels vs US$. The markets will watch US PMI and US Trade balance for intraday direction.

UK will host the President the EU commission & EU chief Brexit negotiator today, starting the process of securing the UK a free trade deal with the EU. GBP strengthened this morning supported by stronger-than-expected UK services PMI and unwinding of safe-haven currencies. A breached 1.3150 gives GBP the potential to rebound back towards the 1.35 level vs US$- barring no further ME tensions.