Dollar Drives Higher
The US dollar has started the week on a better footing following the heavy sales seen at the end of last week. Rising tensions between the US and Iran, in the wake of the weekend’s drone strike attacks on Saudi Oil sites, has seen equities prices coming off, fuelling safe-haven inflows for USD. USD index trades 97.87 last. Looking ahead this week, the key focus in on the September FOMC meeting, with opinions split as to whether the Fed will ease again.
EUR Reverses Lower
EURUSD has been a little softer today as a higher US dollar weighs on the rate. The market has recently seen strong buying in the wake of the ECB announcing fresh easing at its September meeting. The market seems skeptical as to the effectiveness of the new measures and for now, EURUSD remains above the 1.1025 level broken in the post ECB move.
GBPUSD has softened also, in light of the stronger US dollar. The backdrop remains broadly GBP positive for now, however, as the risk of a no-deal Brexit has receded significantly. The market is now awaiting the outcome of tomorrow’s UK Supreme Court hearing on Johnson’s proroguing of parliament. If the decision is upheld this could be a further boost for GBPUSD which trades 1.2444 last, sitting just below the 1.2493 level for now.
Risk Assets Weak But Recovering
Risk assets have been under pressure today as the market digests the uptick in geopolitical tensions in the Middle East. Iran has responded to US accusations that it was behind the drone attacks, denying the claims and warning that it is ready for war. SPX500 trades 2992.73 last, and though still in the red, we have seen a partial bounce off the day’s lows.
Safe Havens Supported
Safe havens have both been higher against USD today. Following large gaps at the open as the market reacted to news of the drone strike on Saudi oil sites, momentum has paused though JPY and gold both remain bid against USD. XAUUSD trades 1504.47 last, with price still below the 1522.75 level for now. USDJPY trades 107.74 last, with price sitting back above the 107.62 level for now.
Crude Reverses Gains
Oil prices have seen a wild session so far today. Following the massive gap open last night, which saw prices spiking 20% higher (their largest ever one day move) price has since reversed to close nearly half of the gap. Aramco has said that it aims to have around two-thirds of production up and running again by the end of Monday which has helped curb the spike higher. Oil trades 59.21 last, sitting above the broken 58.67 level for now.
AUD Up, CAD Down
USDCAD has been higher so far today, with CAD weighed on by both the stronger USD and the move lower in oil following the gap higher at the open last night. USDCAD trades 1.3268 last with price still well supported above 1.3207 for now.
AUDUSD has been higher today again. The backdrop of positive expectations around ongoing US/China trade talks is helping keep AUD bid. News of a potential interim trade deal between the two largest global economies has been a big boost for AUD which is often used as a proxy to trade China. AUDUSD trades .6878 last with price still above the .6852 level for now.