Dollar Finds a Bid

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Market Drivers January 8, 2019
Quiet trade in FX
Brexit wrangling continues
Nikkei +0.82% Dax 0.53%
Oil $48/bbl
Gold $1283/oz.

Europe and Asia:
AUD AU Trade Balance 1.9B vs. 2.3B

North America:
USD Trade Balance 8:30
CAD Trade Balance 8:30

It’s been a quiet lackluster night of trade in FX with majors carving out tight 30 pip ranges in Asian and early London dealing and reversing some of the anti-dollar flows from yesterday.

The dollar was bid across the board, but especially strong against the yen with USDJPY popping through the 109,.00 barrier late Asian afternoon. Earlier in the day the pair quickly tumbled on Tokyo fix which coincided with news that Nellie Liang withdrew her application to join the Fed Board. But the dip was short lived and the rise in US yields help push the pair higher through the session.

The Brexit saga continued with conflicting reports that PM May may or may not extend the withdrawal date if the UK Parliament vote fails to support her plan. With the vote coming up next week the pressure on the pound is sure to ratchet higher, but for now the default position in the market is that EU and UK will be able to come to some sort of a deal to preserve the customs union and keep UK within the common market and the pair, therefore, has been able to hold the 1.2700 figure with relative ease. Next week, however, the volatility could explode with 1.3000 to the upside if May manages to get approval in Parliament and 1,2500 to the downside if the vote fails.

With very sparse eco calendar ahead, FX action will likely be driven by equity and fixed income flows. After a tumultuous December, January prices action looks a lot calmer for the time being with investors hoping the trade tensions with China and Brexit woes would soon improve bringing risk appetite back into vogue. For now, however, consolidation is likely to persist as market look for fresh narratives into the start of the year.

Boris Schlossberg
Managing Director

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