US/Iran Tensions Dissipate

USD Rallying

The US Dollar has continued its rally over the European morning on Thursday with the USD index trading up to 97.05. Yesterday, the ADP employment reading came in well above expectations at 202k vs 160k expected, fuelling expectations for a strong reading in Friday’s employment report.

EUR Lower on USD Strength

EURUSD has been lower over the session so far in light of the rally in USD. Weakness in Eurozone data readings across the week has weighed on the single currency. Traders now ait on the release of the December ECB meeting minutes due later today. Should the minutes reveal any support for further easing among ECB policymakers, EUR is likely to trade much lower.

GBP Down

GBPUSD trades lower over the day with the rally in USD weighing on the G10 bloc. MPs continue to debate the PM’s Brexit bill in the Commons with a vote due later today. The bill is expected to be passed, given the strong Conservative majority, which should keep GBP supported in the near term. GBPUSD trades 1.3080 last, having broken down to fresh lows.

Risk Rallies

Risk assets have been better supported over the last 24 hours. Following an initial downside reaction in response to news of an Iranian missile strike on a US army base in Iraq, risk sentiment has rallied. Trump’s response to the attack has defused expectations of any US response, leading risk assets higher. The SPX500 trades 3269.18 last.

JPY & Gold Lower

Safe havens have been lower over the European session on Thursday. Both JPY and gold have traded lower against USD given the recovery in risk markets. USDJPY trades 109.37 last, turning back up towards recent highs. XAUUSD is still sitting at the bottom of recent lows at 1547.70 last.

Crude Falls Back

Oil prices have traded lower in the early European session on Thursday. Following a brief move above the 63.13 level, crude is now trading 59.83 last, Yesterday, the EIA reported an unexpected drawdown in US crude stores. The scaling back of US rhetoric towards Iran has also weighed on crude as traders perceive a reduced likelihood of full-scale conflict between the two countries.

Lift-Off For Loonie

USDCAD has been firmly higher over the European session on Thursday with price breaking above the 1.3035 level to trade 1.3052. The decline in crude prices over the last 24 hours has weighed on CAD. Unemployment data tomorrow could help stem the decline if the indicator is seen positively.

Aussie Lower

AUDUSD has been back under pressure today with price turning back down to recent lows, trading .6857 last. The market is expecting an RBA rate cut at the bank’s next meeting in February as a response to the wildfires which have decimated parts of Australia. AUDUSD trades .6858 last.