DC Drives Dollar Trade

Posted on

Market Drivers January 19, 2018
UK Retail Sales
FX Looks to DC for direction
Nikkei 0.19% Dax 0.75%
Oil $63/bbl
Gold $1336/oz.
Bitcoin $11700

Europe and Asia:
EUR EZ CA 32B vs. 31B
GBO UK Retail Sales -1.5% vs. -0.6%

North America:
USD U of M 9:50

The dollar continued to wobble in Asian and early European trade today with USDJPY touching the 110.50 level as currency markets remained concerned about the prospect of a possible US government shutdown.

Overnight the House of Representatives passed a continuing resolution that would extend funding until February 16th but the bill faces stiff opposition in the Senate where four Republican senators already voiced their opposition. Senate needs 60 votes to pass the bill and Republicans at only 50 seat majority and Democrats united against the measure the prospect of passage appears to be slim.

The government shutdown per se may not have much economic impact on the US economy, but the specter of uncertainty that it could spread through the general economy could dent investor sentiment especially if the drama in DC turns into a protracted battle of the wills.

The anti-dollar sentiment was clearly evident in GBPUSD trading today where the UK Retail Sales data missed badly printing at -1.5% vs, -0.6% eyed yet the pair quickly reversed its losses to post a post-Brexit high of 1.3945.

With no major data on the docket today, the focus will remain on Washington DC where last-minute deal-making could make trading treacherous into the NY afternoon. For now, the USDJPY pair has found support at the 110.50 level, but shorts are itching to run stops at 110.00 and will no doubt try to push the pair towards that figure if the prospect of a government shutdown becomes more likely as the day progresses.

Boris Schlossberg
Managing Director

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