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An electric start to the year – what next?

Published: Friday 04 January 2019

  • Australian Dollar buffeted by global risk fears
  • US Dollar jumps on jobs data
  • Euro disappointed by data
  • Pound in pause mode awaiting Brexit talks
By the Halo Financial Team

fireworks 2019

Welcome to your first Weekly Currency Update of 2019. I do hope you had a good festive break and are looking forward to a successful 2019, whatever it holds. As expected, the currency markets began trading with a bang! We had a flash market crash at the turn of the year… but what does that actually mean? Well, concerns about the Chinese economy and for the multiple economies that have close export-import relationships with China spooked the markets and so investors flocked to safe haven currencies in a knee-jerk reaction, which calmed and corrected somewhat as political events and economic data started up again after the festive break. The Japanese Yen, as a relative safe haven currency, got a considerable boost, as disappointing data was also revealed for Europe and across Asia Pacific markets.

Australian Dollar buffeted by global risk fears

All this has had a pronounced effect on the Australian Dollar, which relies heavily on China for both exporting and importing, and also has close trading ties with the USA, still at loggerheads with China over trade tariffs. News that China and the US have further talks planned is a little more reassuring for the markets, as investors watch and wait for the next developments to unfold.

US Dollar jumps on jobs data

The US Dollar has also received a lift from strong economic data released on 4th January, after taking a nosedive at the start of the year. The US economy has grown better than expected, but, in spite  of a sharp rise in new hirings, the unemployment rate rose by more than the forecast. The Federal Reserve’s Jerome Powell spoke cautiously this afternoon, knocking both investors’ and the US Dollar’s confidence and allowing the Euro to strengthen against its US counterpart. While he reiterated wage growth and a strong jobs market, his mention of concerns about various global downside risks and the implications of the China situation (or should that be situations?) gave the speech a nervous tone overall, setting a scene of challenge for market participants and sending stocks and the Dollar downwards.
Euro coins in front of a eu flag - Halo Financial
Euro disappointed by data

Meanwhile, the Euro hasn’t dropped as much as it could have, following disappointing data across the board. Ongoing budget tensions, this time with France, haven’t dimmed the Euro, but more lacklustre economic results from Germany chipped away at the strength of the Single Currency, along with some of the poorest composite index results in four years.  

Pound in pause mode awaiting Brexit talks

The Pound is still trapped against its key currency partners by Brexit uncertainty. As the UK waits for further Brexit talks, UK economic data – good or bad – is not having much of an effect on the fortunes of Sterling. Manufacturing results were strong, Construction cautiously optimistic, but slow, and the Service Sector, which is a huge part of UK Gross Domestic Product (GDP) generally disappointing and less confident than before. But Brexit will be the main driver of the Pound in the days, weeks and months ahead.

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