U.S. dollar appreciated in the face of political uncertainty

Januar 13, 2020 15:00

The first week of the year began with the rise of U.S. dollar, fueled by uncertainty in the global political arena over the U.S.-Iran conflict. Iran's response to the U.S. decision to blow up the country's senior military officer's car, was to fire rockets at several U.S. military bases in the region, calling it a response to U.S. action. Following the attack, both sides abstained from sharp comments and political tensions eased in the second half of the week.


Economic data in the U.S. has been mixed. The country's labor market results of December were the main focus: 145 thousand new jobs were created, less than the expected 160 thousand. The private services sector created the largest number of jobs, while the number of employees in the industrial segment decreased by -12 thousand, which confirms the negative trend prevailing in the last half-year. Likewise, the average hourly earnings change was observed, falling to 2.9% per year, which was the lowest level in the last 17 months. Overall, unemployment remained stable at 3.5%. The number of new unemployment applications reached 214,000 and continued to move towards the low end of the cycle.

Investors' optimism about the U.S. dollar has also been fueled by public comments by members of the Federal Reserve on the U.S. economic outlook for 2020. James Bullard, head of the Saint Louis department, said he expects a soft landing this year, Charles Evans of the Chicago Department described the economy as in good shape, and Robert Kaplan, head of Dallas, said the U.S. could grow by 2.0-2.5% a year, if uncertainty and difficulties would decrease.


The main currency pair EUR/USD reflected U.S. dollar trends and depreciated. Old continent economic data included retail sales, which were up 2.2% year-over-year and preliminary December inflation of 1.3% yoy. In Germany, the largest economy, retail sales grew 2.8% year-over-year but the industry showed no positive signs - in 2019, car production reached 4.7 million units, dropping to its lowest point since 1997. EUR/USD ended the week depreciating -0.4%.


The most important Asian pair USD/JPY appreciated significantly, reflecting investors' return to U.S. dollar positions. Japan's economic performance included the manufacturing PMI index, which stood at 48.4 points and was at its lowest level in the past 3 years. Household consumption declined by -2.0% per year, which until now has been positive and contributed to economic performance. The USD/JPY has ended the week appreciating +1.3%.


The British pound has reflected the market trends. Considering Brexit, the House of Commons on Thursday approved a plan to exit the European Union proposed by Prime Minister Boris Johnson, paving the way for a withdrawal on January 31 this year. It will then be followed by trade talks with 11 months until December 31, 2020, during which Britain will need to agree trade terms with the European Union. No important economic data was published in the country. GBP/USD has ended the week depreciating -0.1%.

Economic Events

This week will start with British economic data on the growth and industry output. Chinese international trade results are expected early on Tuesday, followed by U.S. inflation figures. On Wednesday, investors will be watching Britain's inflation and European industry data. U.S. retail results are expected on Thursday, with a speech by Christine Lagarde, head of the European Central Bank. On Friday, Chinese indicators on economic growth, industrial production and retail sales, will be in spotlight.

According to Admiral Markets market sentiment data, 59% of investors have long positions in EUR/USD pair (increased +25 percentage points compared to last week). In the main Asian pair USD/JPY, 23% of investors have long positions (down 42 percentage points). In the GBP/USD pair, 49% of participants expect a rise (decreased -3 percentage points). Such market data are interpreted as contraindicative, suggesting appreciation in GBP/USD and USD/JPY pairs and depreciation in EUR/USD pair. Analysis of positioning data should always be accompanied with fundamental projections and technical analysis.

Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals Eine Komplettlösung für das Bezahlen, Investieren und Verwalten Ihres Geldes

Admirals ist mehr als ein Broker. Wir sind der Dreh-und Angelpunkt für Ihre Finanzen, indem wir Ihnen eine breite Palette von Finanzprodukten und -dienstleistungen anbieten. Wir machen es möglich, persönliche Finanzen durch eine Komplettlösung für das Investieren, Ausgeben und Verwalten von Geld anzugehen.