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AETOS Market Commentary 13/02/2019

AETOS Capital Group


The Australian dollar rose on Tuesday, closing at 0.7094(+33 pips) against the greenback. The Australian dollar rebounded on Tuesday on renewed optimism over US-Sino trade negotiations.
The commodity pair has previously fallen to six-week lows on Monday while the US dollar index looks set to snap its nine session winning streak. Today, the RBA Heath will provide a speech, following on with the release of the Westpac Consumer Confidence Index for February. As has been the case for the past 10 session, the main theme of the session was the US dollar. However, having rallied in each of the previous nine sessions, this time it weakness in the US dollar index (DXY), rather than strength, that was the story on Tuesday. On the trade side, optimism for a trade deal between the US and China, or at least an extension to the hard deadline of March 1 when higher US tariffs are scheduled to begin, helped to lift stocks and Asian currencies, including the Aussie dollar. “Market sentiment has been boosted over the past 24 hours by some more encouraging news on US-China trade negotiations,” said David de Garis, Economist at the National Australia Bank.“White House press advisor Kellyanne Conway told Fox News that Trump ‘wants to meet with President Xi very soon’ while Trump added at a campaign rally that ‘we don’t want China to have a hard time’. Adding further fuel to the rally in risk assets, Trump also hinted that he may be prepared to extend the deadline when higher tariffs may kick in. “If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” Trump said. In Australia, a small bounce in Australian business conditions in January helped kick-start the rally in the AUD/USD, helping to ease concern that momentum in the economy is slowing fast. News that new home loan lending tanked again in December was ignored as a result.


The euro strengthened to 1.1328(+51 pips) against the greenback on Tuesday. The bullish momentum developed during US trading hours, as Wall Street posted a notable advance on the back of headlines indicating that the US Congress reached an agreement about funding the government, still pending of President Trump's approval, who later said that he can't be happy or thrilled with the border deal. Other headlines showed that US-Sino that trade talks will continue this week, with Treasury Secretary Mnuchin saying that they are “looking forward to several important days of talks.” The EU didn't release relevant data, while the US offered some minor figures, with the NFIB Business Optimism Index down to 101.2 in January from 104.4 in February, and the JOLTS Job Openings for December, which beat expectations by printing 7.335M. The Fed's head Powell offered a speech not related to monetary policy, yet in the middle, he said that he doesn't think the probability of a recession is elevated, nothing that the market didn't hear before. The EU will release December Industrial Production this Wednesday at 21:00 AEST, while the US will present inflation updates for January. Final yearly inflation is foreseen at 1.5% while the core reading has been forecasted at 2.1%.


The Pound made marginal gains on Tuesday, closing at 1.2891(+29 pips) against the greenback. On the data front, there were no macroeconomic releases coming from the UK, although PM May spoke before the UK Parliament. Among her comments, she repeated that the government plans to honor Brexit's vote and leave on March 29, rejecting the possibility of remaining in the EU customs union. She added that they are still exploring alternatives to the backstop, and will return to the Parliament on February 26. If there is going to take place a new vote on a modified deal, it would then take place after that date. There were some rumors earlier in the day suggesting that PM May would resign next September, later denied by her spokesman. This Wednesday, the UK will release January CPI and PPI data, with inflation expected to have retreated below 2.0% yearly basis.

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