AETOS Market Commentary 08/02/2019

EURUSD

The Euro weakened further to 1.1342(-23 pips) against the greenback. The EURUSD pair is now on steady downtrend price action having achieved a bearish breakout during U.S. market hours. US dollar yesterday closed positive for the fifth consecutive trading session. While US Greenback suffered early in the day following U.S. President Donald Trump’s state of union speech, risk-averse investor sentiment, fundamental weakness surrounding EURO and positive macro data updates in U.S. market helped US Greenback make a clear bearish breakout. The common currency was sold-off as a result of additional signs of an economic downturn in the Union, following the release of Germany Factory Orders, down in the month of December by 0.4% MoM and by 3.9% YoY, and a report from the European Commission, cutting growth and inflation perspectives for this year. The Union's GDP was downgraded to 1.3% from 1.9% previously, while the inflation outlook was lowered to 1.4% from the previous 1.7%. The dollar got additional support after the BOE's monetary policy announcement sent GBP/USD to 1.2853, its lowest in almost three weeks. Dollar's strength faded after the US opening, as several Fed officials, speaking in different events, reminded speculative interest the latest central bank's dovish stance. Fed's Clarida said that, given the good momentum in the economy, the central bank can be 'very patient' this year, while Fed's Kaplan later remarked that they shouldn't be stimulating the economy at this point, with slower global growth and the shrinking yield curve hinting headwinds are coming. Indeed, and as said some time ago, is the battle of the 'less weak' the one going on around EUR/USD, with the shared currency having more odds of losing it. Friday will be a quiet day in terms of macroeconomic releases, as the only event scheduled is German December Trade Balance, expected to post a surplus of €18.4B. Sentiment could take its toll on the FX board, as equities finally gave up this Thursday to growth concerns, edging sharply lower in Europe and the US.

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GBPUSD
The Pound made small gains on Thursday, closing at 1.2948(+16 pips) against the greenback. The British pound initially fell during the trading session on Thursday but found enough support below near the 1.28 level to turn around and smashed through the previous downtrend line, showing signs of recovery yet again. As how the markets were expecting the interest rate decision to happen, the Monetary Policy Committee unanimously opted to keep rates and the APP unchanged, yet at the same time, decided to downgrade this year growth's forecast from 1.7% to 1.2%, as a result of mounting Brexit uncertainty. Bank of England Governor Carney later offered a speech, warning that the UK faces the weakest growth since the financial crisis, adding that a no-deal Brexit implies negative growth quarterly basis. He also mentioned that the central bank expects business investment and economic growth to soften in the near term but later pick up, once the Brexit "fog clears." It was not doom and gloom: Carney said that a no-deal Brexit is not the most likely scenario and that the market should not prepare for further rate hikes, either for rate cuts. All in one, market players believe that, with a deal Brexit, the central bank will pull the trigger, the reason beyond an over 100 pips bounce in GBP/USD. A weaker dollar in the final session of the day kept the pair near its daily high of 1.2996.

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