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​​​​​​Today's news headlines:

  • ‘Oil climbs as US strike on Iran General raises conflict fears’. Brent Crude oil prices jumped to ten-month highs following a US airstrike that killed a major Iranian General in Iraq. The assassination has ramped up tensions between the US and the Middle East, and Iran has vowed ‘severe retaliation’ in response to the attack. (Bloomberg)
  • ‘Boris Johnson’s top aide seeks "weirdos" to overhaul government’. Dominic Cummings has revealed in a blog post he wants an ‘unusual set of people with different skills and backgrounds’ to work at Number Ten. He also claimed there are ‘profound problems with how the British state makes decisions’, and that he wants his role to be made redundant by the new intake. (Bloomberg)

Fresh conflict

For a fleeting moment, calm had returned to the market. The UK voted in the largest seat majority since Tony Blair’s win in 2001, and the US and China agreed a phase one deal designed to lead towards a series of subsequent deals. Overnight, Donald Trump authorised a US military airstrike in Iraq of Iran’s second most powerful official in response to a storming of the US Embassy in Baghdad, instigating a marked flight to safety throughout the market. The slaying of Qassem Soleimani—a legendary General of the Iran-Iraq war who enjoyed wide popularity throughout the mainly Shiite-Muslim Iran—was met with the promise of severe retaliation from Supreme Leader Ayatollah Ali Khamenei. The clear escalation upsets the diffusion of tensions which were expected to lead to US Dollar depreciation during the early part of 2020. 

Bottom line: Donald Trump’s modus operandi is conflict—not a judgement but rather a statement of fact—which undermines the argument that a period of calm would follow the US-China economic spat of 2019. Since this is nothing new, it remains to be seen whether this incident leads towards a more significant escalation or a momentary shift in sentiment. It is still too early in the year to determine a broader market direction, but this early shift to risk-off might be a foreshadowing of greater tensions to come this Presidential election year.


The pair traded heavy overnight, extending yesterday’s losses, and reached lows of 1.3083 on the London open. The trade-weighted Sterling Index appears to have found support at its 50-daily moving average, meaning further losses for the pair may be limited. However, the pair remains vulnerable to a sustained drop below the 1.31 figure.


The currency-cross continues to trade relatively flat due to the Dollar being the main driver of its component parts. The pair climbed on today’s London open and may be supported by its 50-daily moving average of 1.1718 in the short-run. German inflation data at 1pm may provide a clearer direction for the pair in today’s session.


The common currency continues to trade lower after New Year’s Eve highs of 1.1239. The pair opened London around the 1.1150 level while the Euro’s trade-weighted Index dipped below its 50-daily moving average. With German inflation data out at 1pm and US manufacturing data at 3pm, the afternoon could provide more volatility than the morning.