We always say the risk happens fast and yesterday was a perfect example of that. The news flow surrounding China/America trade wars and tariffs softened, with some encouraging signs that there is a more conciliatory approach in the background, which meant markets could now look beyond that risk and rally. Things started positively in Europe and gains were posted across the major European indices but it was the US session where things really took off. Stocks there had one of the best days of gains in over two years with gains of over 3% on the day helping to claw back over half of last week’s losses in one quick swoop. In the currency world however this meant the USD was under selling pressures, the USD index dropped to its lowest level since February, now down over 1.5% since the FOMC hiked rates last week.
The USD lost ground to almost all but the JPY, EURUSD traded to near 1.5 month highs, GBPUSD was at almost two month highs and overall the greenback continues to struggle to find any meaningful traction, despite the FOMC being the only tightening game in town, for now. Elsewhere there was a combined effort by a number of nations to push back against Russia with the expulsion of Russian diplomats. This represents another escalation of geo-political tensions with “the West” vs Russia but markets don’t care for now, and its business as usual. GBP has faced some early selling this morning, several attempt for EURGBP to drop below support at .8730 failed to materialize and the bounce has taken us back towards .8785 as highlighted yesterday while GBPUSD was rejected from resistance above 1.4200.
There was really not much new in terms of news overnight and attention will be on confidence data from the Eurozone this morning. Unlikely to cause too big a shake up in the euro as confidence alone will not cause the ECB to deviate from the current plans and projections. House price data and consumer confidence figures also due across the wires in the US session but again, there are bigger things to focus on for the USD. EUR/USD is now off the highs with 1.2421 area acting as the next level of support for now.