Dollar Holding On
Over the European morning on Tuesday, the US dollar recovered initial losses. USD head into the US session just below neutral on the day. The key drivers so far today have been news of US warships being deployed to the Middle East. This has fuelled some safe haven buying in USD and kept the dollar index above the 97.10 support level. However, for now, USD reaction remains muted with a little ahead on the data sheet for the European afternoon today.
Euro Trades Lower
EURUSD continues to flounder below the 1.1217 level as weaker than expected German factory orders once again shine a light on the weak eurozone economy. Concerns for the health of the economy have been a key factor in the move lower over recent months. EURUSD price has been taken down to year to date lows of sub 1.1119.
Pound Under Pressure
GBPUSD has traded a little lower again so far today as the correction to Friday’s rally continues. Political uncertainty in the UK is creating a volatile landscape for GBP trading. Now with the prospect of the US/China trade war heating up again, the external environment is adding pressure also. As of writing, GBPUSD is trading back below the 1.31 level.
Equities Remain Resilient
Despite the sharp sell-off in equities yesterday, in response to news of the US warship deployment to the Middle East, the SPX500 has recovered and stabilized today. The rate has remained in the green over the European morning. For now, the price remains below the 2939.87 though focus remains tilted towards further upside in coming sessions barring any further negative headlines.
Safe Haves in Demand
In light of yesterday’s news, safe havens have been trading a little firmer against USD so far today. Over the European morning, both gold and the JPY have been rising. XAUDUSD is still clinging to the 1280.58 support though upside momentum has ground to a halt. USDJPY remains capped by the 110.81 level broken at the start of the week when price gapped lower on the open.
Crude Recovers on Geopolitical Tensions
Following heavy initial selling on the week, oil prices posted a strong recovery yesterday in response to news of the rising tensions in the Middle East which is typically a bullish catalyst for price. For now, price is back above the 61.89 level though we are trading a little softer today so far.
Commodity Currencies Mixed
USDCAD has had a volatile morning with price recovering from initial losses suffered in the wake of the recovery in oil yesterday. A stronger USD is helping shore up rate while softer oil is keeping CAD capped. For now, USDCAD remains below the 1.3443 resistance level which remains the key topside level to watch.
The Australian dollar has posted a strong recovery today with price breaking back above .7021 briefly before coming off a bit as of writing. Overnight, the RBA kept rates unchanged which boosted AUD given the built-up level of expectations for a rate cut. Despite keeping rates on hold, the tone of the meeting statement was not particularly encouraging. The bank continued to highlight subdued wage growth and weak household incomes as a threat to the economy. The bank is now looking for further increases in employment and inflation or says it may need to cut rates.