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Currency Market Analysis

Jan 08, 2020 | Currency Market Analysis

Global Themes

Dollar goes up after Iran goes ‘ballistic’

America’s dollar was mostly stronger after Tehran’s response to the assassination of its top military official sent currencies on a roller coaster ride. The buck rebounded against safe rivals from Japan and Switzerland, and rose to one-week against the euro and Canadian dollar. Sterling weakened while some emerging markets strengthened. Iran’s ballistic missile attacks on U.S. bases in Iraq reportedly didn’t result in any casualties for American forces. The market continues to hold out hope that the exchange of blows between Washington and Tehran won’t deteriorate into a major military conflict. Nevertheless, the situation remains fluid and unpredictable. The dollar index rose to one-week highs, propped up by solid data and markets giving the Mideast tensions the benefit of the doubt that things won’t unravel into a major feud with the potential to destabilize oil markets and the global economy.


The euro fell to more than one-week lows after German data dampened hopes of economic stabilization taking hold. German industrial orders took an unexpected plunge of 1.3% in November, compared to forecasts of a modest increase. The data painted a still anemic picture of Europe’s biggest economy toward the end of 2019.


The yen slipped from fresh three-month highs reached overnight as the dust quickly settled after Iranian retaliation for the assassination of its top military leader. Iran launched a series of ballistic missiles toward U.S. bases in Iraq which initially stoked fears of a widening crisis in the Middle East. However, the sense that cooler heads may ultimately prevail helped to restore some order to markets. Tehran said it isn’t seeking war while President Trump tweeted that “all is well.”


Tensions remain high between the U.S. and Iran but they quelled a bit which along with a robust read on America’s economy buoyed the greenback. Payrolls company ADP reported that private employers added a stronger than expected 202,000 jobs in December which easily eclipsed forecasts of 160,000. The data comes ahead of Friday’s more important nonfarm payrolls report which is forecast to show hiring slowed to a still solid pace of around 160,000 last month after a November’s surge of 266,000. A solid jobs report would temper slowdown worries and potentially put a wind at the dollar’s back. 


Canada’s dollar stuck close to one-week lows as oil slid and data depicted a resilient U.S. economy. A more than 1% decline in oil pushed prices below $62, weighing on commodity-correlated assets like the loonie. Meanwhile, a gauge of U.S. job growth surprised to the upside, easing concerns about moderating growth south of the border. Employment holds a near-term key to the loonie with Canada’s December jobs report looming Friday.

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