ForexLive European morning FX news wrap: Dollar holds weaker as markets await fresh direction

Author: Justin Low | Category: News

Forex news from the European morning session - 7 January 2019

Headlines:

Markets:

  • CHF leads, USD lags on the day
  • European equities mixed, mostly lower; E-minis down 0.2%
  • US 10-year yields
  • Gold up 0.5% to $1,291.36
  • WTI up 2.4% to $49.10
  • Bitcoin up 4.9% to $4,020


The greenback moved lower to begin the week as traders weigh a more dovish take by Fed chair Powell on Friday. The dollar started the European morning already on the back foot and there was little else for currency traders to act on as risk sentiment also remained cautious.

US and China began trade talks in Beijing but markets are seemingly unconvinced that there will be anything significant to come this week. Instead, all eyes will now turn towards the WEF in Davos, Switzerland where Trump could potentially meet with China vice president Wang Qishan for another round of talks (though I reckon that is unlikely).

European equities started off with decent gains before paring them and are trading close to the lows for the day now. Meanwhile, US equity futures also pared earlier gains to sit just below flat levels on the day.

That didn't affect currencies all too much though with currency traders more focused on trading the Powell put instead. EUR/USD began the session around 1.1420 but now trades near the highs at 1.1440 levels. GBP/USD also advanced to 1.2765 from 1.2730 but saw gains limited as Brexit returns to the spotlight. The pair then fell to 1.2730 again before climbing back to 1.2750 levels now.

USD/JPY also traded in a subdued manner with price ranging between 108.10-30 levels for the most part as traders mull between a weaker dollar, mixed equities sentiment, and an indecisive Treasuries market.

Commodity currencies basically held gains against the dollar and is little changed since the start of the session. There is some interesting price action in USD/CAD though as the pair now tests the trendline support that began in October. That is helping to limit price action so far today.

Looking at the session ahead, expect focus to turn towards the performance of the US cash equity market as they will be providing the vote of confidence to markets with regards to how to interpret the US-China trade rhetoric. Apart from that, also look out for the US December ISM non-manufacturing index release. With plenty of focus in the currencies market being on the dollar and the US economy, the release could be a "make or break" factor for the greenback today.


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