The Friday Forex takeaway

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Key Points From This Week

  • Trump Announces Trade Deal Signing Date

Global investor appetite was strengthened this week in response to Trump’s announcement that the US and China will now sign off on the phase-one trade deal on January 15th. The US announced on December 14th that the two sides had agreed the deal, which was originally laid out in October, though the market was waiting for both countries to conduct a legal review before the official signing. Trump also announced that at a later date he will be heading to Beijing to meet with Xi JinPing to progress talks onto the second phase of the deal.

  • US-Iran Military Fears Resurface

While risk appetite was encouraged by news of the US-Sino trade deal signing, an increase in aggressive rhetoric between the US and Iran rocked risk appetite into the back end of the week. The US accused Iran of attacking the US embassy in Iraq and responded with a series of drone strikes on facilities in Iraq linked to Iranian backed militia. Iran immediately condemned the attacks and said that it stands ready to defend itself against any further aggression. The US in turn has said it will act pre-emptively to stop any further attacks. Today it was reported that Iran’s top general was killed in a US drone strike in Baghdad with Iran vowing “crushing revenge” on the US.  As such, there is now a real fear once again of conflict between the US and Iran.

  • Global Manufacturing Readings Still Weak

Manufacturing readings for the Eurozone, the UK and Canada released this week showed weakness once again with readings coming in below expectations and the Eurozone and UK reading sectors seen remaining in negative territory last month. With manufacturing around the globe having trended lower last year, the market is now waiting to see if there is a pickup over H1 2020 in reaction to the trade deal between the US and China.

Key Events Next Week

  • Eurozone CPI Estimate

The first look at Eurozone CPI this year will be closely watched. In December, new ECB head Lagarde said that the ECB remains committed to achieving its inflation target and while rates were held on hold at the end of last year, the market still feels that further easing could be coming if data continues to trend lower.

  • ECB Meeting Minutes

The minutes of Lagarde’s first ECB meeting will be keenly received b traders eager to learn of the discussion around the outlook for the Eurozone. Traders will also be eager to see how much of the recent division remains among ECB members following Lagarde’s informal gathering of ECB policymakers aimed at improving unity within the group.

  • US NFP

US labour market data for the final month of 2019 is due next week and will be closely watched by the market. The prior reading was much firmer than expected and should we see similar strength this time around, that could help USD to recover some of its recent losses.

Keep an Eye On

  • US-Iran Tensions

The situation in Iran is being closely watched by global citizens and traders alike as the risk of a proper military conflict grows. Any further aggression between the two countries, or any escalation in rhetoric, will likely fuel further risk off trading, weighing on global equity indices and seeing gold and the Yen supported through a continued flight to safety among investors.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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