Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 22 January 2018 at 22:18 GMT

US Wrap: Forex traders yawn at news of US budget deal

FX Trade Strategist /
  • GBPUSD has soared on hopes of a “soft Brexit” hopes 
  • US politicians have agreed on a stop-gap budget deal 
  • The IMF has lifts global growth forecasts to 3.9% 
  • News of an extended deal on output curbs lifted crude oil

By Michael O’Neill

NY Focus
: Forex markets were skittish on Monday. EURUSD traded lower, falling from 1.2262 at the open to 1.2215 in the early afternoon. Prices perked up into the close, with traders seemingly unconcerned about a dovish European Central Bank meeting result when it meets on Thursday.

Sterling was the star of the show. French President Macron’s comments on Sunday, suggesting the possibility for a bespoke deal for the UK with the EU, underpinned GBPUSD. The lack of any major economic data releases and the proximity to the psychologically important 1.4000 level, contributed to the move.

USDJPY popped on news that Republicans and Democrats agreed to a budget deal until February 8. USDJPY rose from ¥110.70 to ¥111.21 by the noon hour. Prices drifted lower until closing at ¥110.95 , with traders awaiting the results of the Bank of Japan meeting, which will be held later today.

The International Monetary Fund upgraded its global growth forecasts for 2018 and 2019  to 3.9% from 3.7%, as suggested in October.

AUDUSD underperformed the rest of the commodity currency bloc, finishing the day close to unchanged while the Loonie and Kiwi dollars eked out small gains.

WTI oil prices were choppy, and traded inside a $63.05-$64.10 range. Prices were lifted by reports that Saudi Arabia and Russia pledged to cooperate on production cuts beyond 2018. News of renewed production from some previously shut-down Libyan oil fields did not have a lasting impact.


Reports that Saudi Arabia and Russia will cooperate on production curbs beyond 2018 gave crude prices a lift. Photo: Shutterstock

Wall Street closed higher, bolstered by the US government funding deal and the bullish IMF forecasts. Netflix (NFLX: NASDAQ) announced that they signed up nearly 2 million more subscribers than analysts forecast in Q4. Prices soared in after-hours trading rising from $227.49 at the close to $247.50.

Tuesday Focus: The German ZEW sentiment surveys are on tap today. The forecasts are for upticks in all three categories, which will underpin EURUSD. If so, it will make it harder for ECB president Mario Draghi to deliver a believable, dovish EU economic outlook on Thursday.

The short-term EURUSD technicals are bullish while prices are above 1.2180 and 1.2220, looking for a break of 1.2290, to target 1.2500.

EURUSD 4 hour chart
Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more.

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– Edited by Robert Ryan

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.


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