Key Points From This Week
US – Iran Tensions Subside
The week started off in bad shape with risk markets selling off as tensions between the US and Iran escalated. During speeches made during a day of mourning for slain Iranian general Soleimani, Iranian leaders vowed to take revenge on the US. Late on Tuesday night, reports surfaced of Iranian missile attacks on US sites in Iraq. Investors feared the worst and risk assets recoiled while safe havens saw strong buying.
However, the US refrained from retaliatory action and in an address to the Nation, Trump announced fresh sanctions on Iran, though said the US would not be retaliating as Iran was believed to be stepping down from the conflict. The market was clearly relieved by Trump’s comments and risk markets have since recovered.
UK Parliament Approves Johnson’s Brexit deal
UK MPs returned from the Christmas holiday this week and immediately got to work debating the PM’s Withdrawal Agreement Bill. The bill, which was passed in its initial stage before Christmas, underwent three days of debates before MPs finally voted in favour of approving the bill on Thursday. The UK will now leave the EU on January 31st and the UK will enter a transition phase, while trade talks are carried out, due to end on December 31st 2020.
EIA Reports Crude Build
Following four consecutive weeks of inventory declines, the EIA reported a 2 million barrel inventory surplus last week. The news amplified the selling in crude, which had been initially higher on the week due to US-Iran war fears. However, with tensions having calmed for now, news of the inventory build has taken crude prices lower over the week.
Key Events Next Week
US CPI
US inflation data will be closely watched by traders next week. At its last meeting, the Fed kept rates on hold and signalled that rates would likely remain on hold in the near term unless data deteriorates. With this is mind, any downside surprise here could fuel USD selling as traders once again start to build Fed easing expectations. However, a strong reading will keep USD supported, encouraging the view that the fed will remain on hold.
UK CPI
UK inflation will also be a key release next week. With data having been trending lower recently as a result of Brexit uncertainty, the market will be keen to see if inflation picked up last month given the weakened risks of a no-deal Brexit. The BOE is not expected to move on rates in the near term though any significant surprise here could cause volatility in GBP.
Keep An Eye On
US-Iran Situation
While the US has held back from any further action against Iran at this point, citing reports that Iran has been instructing militia in Iraq not to attack US sites, the threat level remains high. Iran could still launch further attacks against US assets which could in turn fuel further attacks from the US, escalating the situation once again. If this does happen, risk appetite will be heavily weaker.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!