Uncertain markets holding FX flows steady

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The U.S. Dollar is trading in tight ranges, maintaining gains against most commodity-based currencies, which are eager to a solution to the trade conflicts surrounding many regions from Europe to China.

Overview

With an onslaught on the economic growth outlooks of many, investors are seeking positivity wherever they can find it. The government shutdown has U.S. economists worrying, but votes on proposals to end the impasse will occur later today. We shall see if there is anything that signals progress.

Secretary of Commerce Wilbur Ross is scheduled to do an interview with Bloomberg at 12:30PM and this morning we will get some statements from central bank officials from the U.K., Japan and others as they deliver assessments at the Davos Economic Forum. The Markit U.S. Composite Purchasing Managers’ Index (PMI) will be released at 9:45AM, which could dent the greenback if the expansion is less than expected for January preliminary figures.

What to Watch Today…

  • •Markit PMI Figures 9:45AM

EUR

The Euro is not only being dragged by Draghi, the European Central Bank President who is currently giving his typical somewhat dovish press conference following the ECB’s policy meeting, but also poor data. At a time of doubt over the region’s health, Markit PMIs from the Euro-zone disappointed. The Eurozone figure revealed only an expansion reading of 50.7 under the estimated 51.4, negatively impacted by the current contraction in French Services sector and German Manufacturing.

The ECB is certainly not helping appreciate the currency, but that could change as traders later interpret and conclude Draghi is signaling downside risks with a touch of hope in the stability his central bank likes to foment. We think Euro will return to its recent averages after an initial dip based on Draghi’s admission that things are indeed slowing down.

GBP

The British Pound continues to trade around its strongest levels since the start of November with ongoing optimism over the chances of a solution to Brexit that do not include a “no-deal” scenario. We shall see if anything changes next week as Parliament is supposed to have a chance to look at Prime Minister Theresa May’s Plan B. Bank of England Mark Carney could bring Sterling down with any commentary hinting at doubts over the economy, but he has made it clear before Davos that he sees a no-trade situation with the EU the worst case the economy could face down the line if no solution worked out.

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