Overnight, Iran fired rockets at US bases in Iraq in retaliation for last week’s slaying of Iranian General Soleimani. The head of Iran’s national security council also told journalists that 13 retaliatory scenarios are being considered which could cause a ‘historic nightmare’ for the US. Bear in mind, all the while Iran says it doesn’t want an escalation of this conflict. If the back and forth threats weren’t so frightening, they would be comedically ludicrous. It goes without saying that markets are watching the back and forth closely. This morning Brent Crude—the main oil benchmark—rose 4% back above the key $70 USD per barrel level indicating that markets believe actions and not the rhetoric.
Bottom line: President Trump is expected to speak sometime this afternoon which will no doubt touch upon the Iranian conflict. Aside from the US-Middle-East tensions, markets are also watching a few key economic releases for signs of improvement. Also released this afternoon will be the US ADP Non-Farm Employment Change figure, which is seen as a precursor to Friday’s crucial Non-farm payrolls.
Yesterday, the pair sold off following a brief rally above 1.32 on the London open. Cable found support at the 1.31 figure by the afternoon and managed to keep afloat in overnight trading. This morning’s open in London saw the pair tick higher, but this may be compromised with the release of US labour market data at 1:15pm. This afternoon, volatility may also occur during expected comments from Donald Trump regarding Iran’s overnight attack on US-Iraqi bases.
Yesterday, the currency-cross gained early in London trading for the second day in a row before erasing gains. Today may be a similar story; the pair has surged above the 1.18 level on the London open following weaker-than-expected German Factory Order data. This morning’s Eurozone economic climate confidence surveys may exacerbate already weakened European sentiment in today’s session.
Yesterday, the common currency managed to cut losses at its 200-daily moving average by closing at the key level. What’s more, on a trade-weighted basis, the Euro closed below the tight range that we have been monitoring this week – the 50 and 100 daily moving averages. This morning, the pair continues to drift lower after German Factory Orders posted a weaker-than-expected reading. This afternoon, we have US labour market data and a speech by Trump regarding escalating US-Iran tensions which may bring some intraday volatility.