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AETOS Market Commentary 19/02/2019

AETOS Capital Group Partnership


The euro rose and closed at 1.1308(+14 pips) against the greenback. The Euro continues to track global risk trends: with equity markets rallying, the Euro gained against the safe havens and lost ground against the commodity currencies. A significant market measure of medium-term inflation expectations dropped to its lowest level in over two years, stressing the increasingly difficult environment facing the European Central Bank. On the other side, the American dollar started the week on a down note, although major pairs' movements were limited due to the absence of macroeconomic releases and banks holidays in the US and Canada. The greenback's decline was attributed to hopes surrounding and US-China trade deal boosting demand for high-yielding assets. The most traded pair peaked at 1.1333, easing by the end of the London session toward the current 1.1300 region, with dollar recovering ground amid the poor performance of European indexes and dovish comments from ECB officials, which repeated what Benoit Coeure said last week about adding stimulus should the economic situation deteriorate further. Today, Germany will release the ZEW survey on economic sentiment for the country and the EU, both seen improving modestly in February. The EU will release some minor December figures, including the Current Account and Construction Output which usually have a limited effect on prices, yet disappointing numbers will likely add to mounting concerns about the Union's economic progress.


The Aussie dropped to 0.7126(-18 pips) against the greenback on Monday. The Aussie price action for Monday was rather similar to previous sessions, lifting in Asia before falling towards the close. Trade volumes were thin on Monday as the US markets were shut for the Presidents holiday. After starting the week at .7139, the AUD/USD rose steadily during Asian trade, taking its cues from movements in the Chinese yuan and stocks that rallied belatedly on renewed optimism over US-Sino trade negotiations. However, when Asia went home the Aussie dollar rally ran out of puff, seeing it slide into negative territory towards the close. On the data front for today, the economic calendar looks set to pick up from the return of US markets following a long weekend. In Australia, the RBA will release the minutes of its February monetary policy meeting at 11.30am AEDT. Likely to be nothing surprising as the RBA have been quite vocal about their stance. However, that’s not to say it will be a non-event — the minutes have surprised markets in the past before. Before the minutes are released, the latest ANZ-Roy Morgan Australian consumer confidence report will also be released. It’s unlikely to generate any interest from traders.


The Pound rose and closed at 1.2919(+16 pips) against the greenback. The Sterling saw some demand increasing as the possibility that Brexit could be extended past March 29 is in the picture, although no official word came on it. In the meantime, seven Labour MPs quit their party to form an independent group amid divergences with Corbyn's latest stance. Meanwhile, the EU reiterated that the Brexit withdrawal agreement is not open to negotiations, neither they can provide legally binding changes to the Irish backstop. The United Kingdom’s Prime Minister May should deliver a deal by February 27. Failure to do so could see a vote taking place on taking over Brexit process, and May expects them to order her to seek an extension of negations warning lawmakers that this will be their last chance to avoid a no-deal Brexit. This Tuesday, the UK will release its latest employment data, with the ILO unemployment rate for the 3 months to December seen steady at 4.0, and average earnings are seen up in the same period, quite an encouraging sign considering inflation fell below 2.0%. Also, the number of people seeking the unemployment benefits in the UK is foreseen at 2.4K in January, down from 20.8K previously.

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Source: https://www.aetoscg.com/uk/market-commentary
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