Currency Markets Start Week Cautiously Amid Rising Tensions in Iraq

Xe Corporate APAC

January 12, 20203 min read

The AUDUSD opens at 0.6894 (mid-rate) and the NZDUSD opens at 0.6634 (mid-rate) this morning.

Currency markets will start the week with a cautious tone after reports overnight of a further rocket attack on an air base north of Baghdad in Iraq. There are reports of 4 Iraqi soldiers being wounded but no reports so far of any US casualties. Also over the weekend, the US threatened to seize the Central Bank account of Iraq if Iraq kicked their military out of the country. This is the first time the US have used the Banking system as a weapon of sorts and could lead to more business being done in Euros rather than US Dollars. Iraq holds about USD 3.0 billion in their US account.

Friday night saw the release of the monthly US jobs report which showed 145k jobs added versus expectations of 160k. The unemployment rate remained the same at 3.5%, however wage growth was slower at just +0.1% m/m below the +0.3% m/m forecast. This will create a dilemma for the US Federal Reserve who are wanting to see inflation move back up above their 2.0% target level.

In the UK, some Bank of England Board members have been talking about the prospect of an interest rate cut to help offset any uncertainty caused by the looming Brexit decision which should take effect on January 31st. The UK will then have until the end of the year to agree a trade deal with the EU, which is a tight time frame given they have taken over 3.5 years to agree Brexit itself.

This week on the data front the main points will be China's trade data due Tuesday followed by US Consumer Price inflation Tuesday night and then US retail Sales on Thursday night.

Global equity markets closed mostly lower on Friday - Dow -0.46%, S&P 500 -0.29%, FTSE -0.14%, DAX -0.09%, CAC -0.09%, Nikkei +0.47%, Shanghai -0.08%.

Gold closed out the week at $1,560.10 an ounce while WTI Crude Oil had it's worst week since July, closing at $59.04 a barrel after tensions appeared to be easing in the Middle East.

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