Forex news from the European morning session - 3 January 2020
Headlines:
- Pompeo: Soleimani strike decision was necessary
- Pompeo on Iran: US remains committed to de-escalation
- Brexit: Boris Johnson and von der Leyen said to be meeting next Wednesday for talks
- Oil trades at eight-month high on brewing tensions in the Middle East
- European mid-morning: Markets stay more risk-off
- UK November mortgage approvals 65.0k vs 64.5k expected
- UK December construction PMI 44.4 vs 45.9 expected
- Germany December unemployment change 8k vs 4k expected
- EU trade commissioner Phil Hogan plans Washington trip on 14-16 January
- China securities regulator denies report on Shanghai-London Stock Connect suspension
- Saxony December CPI +0.6% vs -0.8% m/m prior
- US embassy reportedly urges citizens to leave Iraq immediately
- France December preliminary CPI +0.4% vs +0.3% m/m expected
- US Treasury 10-year yields slip to fresh three-week lows
- China to stick with inflation target of around 3% this year - report
- Iran's Khamenei: 'Severe retaliation' awaits Soleimani killers
Markets:
- JPY leads, AUD lags on the day
- European equities lower; E-minis down 1.0%
- US 10-year yields down 5.6 bps to 1.821%
- Gold up 1.1% to $1,545.85
- WTI up 3.5% to $63.34
- Bitcoin up 5.4% to $7,338
European morning trade was very much centered around US-Iran tensions after the airstrike in Baghdad which killed a top Iranian military commander.
That set off a risk-off tone in markets, which intensified during the session as tensions in the Middle East continues to brew with Iran threatening 'severe retaliation'.
The yen continued to hold firm as bonds were bid amid safety flows. Equities were hammered rather badly with European stocks deep in the red while US futures are down by ~1%.
USD/JPY eased from 108.20 to 107.92 before keeping just above 108.00 for now. The greenback is the other main beneficiary in the currencies space amid risk-off flows.
EUR/USD eased from 1.1160 to 1.1125 while cable fell from 1.3110 to 1.3060-70 levels currently. The aussie and kiwi also kept weaker as domestic bond yields fell as a result of the more negative risk mood in markets.
Gold was a big gainer as it climbed from ~$1,535 to ~$1,551 before settling just under there now as the push higher in bullion continues to gather steam over the past two weeks.
As tensions are flaring high, oil also saw big gains with the highs today surpassing the Saudi attack back in September but gains are keeping between 3% to 4% as it has been throughout the session so far.
Looking ahead, markets are still very much gripped by the events in Baghdad and the blow up in US-Iran tensions. That should see the risk-off mood continue into North American trading and into the weekend - barring any major headline surprises.
