Without any serious news hitting the market today, the USD is currently losing some lustre after its strong run for weeks and it is down against major currencies. The GBP and commodity currencies are the best performers. The relative appeal of the USD seems to have hit a level of saturation in absorbing the pressure from counterparts. Its incredible rally was capped at a 12-day consecutive advance as Tuesday opened lower. The uncertain turn is because the Fed rate hike expected on 14th December is still buoyant. With that said, here are the winners and losers.
The S&P 500 index is up by 0.6%, rising to record high, exceeding the last mid-August peak in response to the strong gains for the energy sector. The oil prices are going up by over 5% as OPEC agreed to cut production at the end of this month. The Iraq’s Oil Minister said that he would put a new suggestion on the table to push for the production cut. The high oil prices have supported commodity prices in general, with the commodity price index for Bloomberg up by 2% on Tuesday.
The EUR broke its more than 10-days losing streak against the USD, up by 0.2% at 1.0630, although that is subject to change before the trading markets close. Economic analysts are cautious about the European political risk controlling the path of EUR over the next few months, and that could easily make EUR/USD sub parity. Currently, the EUR/USD trades remain unchanged at 1.0630, testing fresh season low posted last minutes under 1.06. Although the resurgence attempt remains minimal in EUR/USD, as the USD wipes-out losses and appear to recover its strength across the major currencies, tracking a slight recovery seen in the European treasury yield won’t be enough. Moreover, the European Central Bank president said that he is ready to employ more stimulus packages whenever required, which is likely to keep prices stable.
There is nothing significance in the EUR calendar today, so the CMC Markets are looking forward to the release of US data for extra incentives. However, in terms of EUR/USD technical levels, the pair finds the abrupt resistance at 1.650, daily high. A break beyond the daily high is expected to test 1.0690 and from there to 1.0700.
GBP is the best currency performer of the day against the dollar, which is up by 1.1%, going through to 1.25% at some stage. The strong rally caught traders by surprise on, November 22 as many were expecting the USD dollar to dominate the market ahead of the midweek Autumn Statement. The British Prime Minister stole the show with her comments, suggesting that there would be no high point when it comes to Brexit. The economists perceived that she was suggesting that the traditional single-market is more likely to prevail.
So, the much speculation about the strong gains of sterling pound against the USD overnight may be due to the anticipation of a fiscal boost in the UK Autumn Statement or by the statement of May, the UK PM that she will look for a “traditional deal” for the Brexit to evade the “cliff edge” that every business fear. This reaction to the statement of May serves to remind traders how tricky it is to trade with a politically-driven currency. The GBP current resilience, especially against the USD and EUR is going to be tested in the coming days after the fiscal boost.
The USD/JPY pair rose to high of 111.37 on Monday only to slide and end the day at 110.78. The pair extended the slid to 110.35 on speculation that the dip will increase in the event the earthquake lead to a considerable damage. However, the Japanese government intensified the Tsunami warning, which help the JPY to recover losses and traded largely unchanged on Tuesday around 110.75 levels.
Besides, Trump through a video message said that he will quit the TPP trade deal on his first in office. According Trump, this will help his administration bring jobs to Americans. Remember, this deal was signed by 12 large economy countries, which cover about 40% of the global economy. The remarks may not be received well by the CMC Markets, because it may increase fears of trade wars. If the financial markets in the US and across Europe respond negatively to the remarks of Trump, the JPY is likely to strengthen.