The USD ends the holiday week in a bearish mood as traders take profits on trade and holiday thinned markets react. Despite another record day on the US equity markets, EUR and GBP are stronger this morning against the USD. All three major US trading indices closed at record highs. This year-end rally looks to continue today as DOW Futures are pointing towards a positive opening of over 50 points when the markets open later this morning. The continued positivity over US-China trade is the main reason for the equity markets move.
The EUR/USD had finally broke through the upper level of a trading range that has lasted the better part of the month of December. Once again as markets remain fragile, the move by traders to square “short” EUR positions as we get towards the end of the year is not surprising. Many traders look at the end of the trade war as a positive sign for the Eurozone economy which has seen the manufacturing part of the economy pushed towards recession.
GBP/USD has made six day highs as pressure on the USD has helped the GBP. Traders now seem more optimistic regarding Brexit. This move is a little surprising as an article from the UK Times has stated the EU is prepared to take tough measures to hold Great Britain to its rules as far as Britain leaving the EU.
USD/JPY had a turbulent night as the currency pair initially moved higher after Japan released data that had both industrial production and retail sales contracting. Industrial Production fell for the second month in a row, coming in at -0.9% in November. Retail sales were also lower, falling to -2.1% in November. Both releases were lower than expected. USD/JPY then moved lower as Japan reported the unemployment rate fell to 2.2% in November, down from 2.4% in October. The up and down movement of USD/JPY emphasizes how thin and volatile trading markets are this week.
The Canadian Dollar has strengthened overnight as the US trade deal with China has been a positive for commodity-based currencies. Traders are buying these currencies as it is expected that a cordial relationship between the two powers will benefit the global economy.
The Peoples Bank of China set the Yuan rate at 6.9879 on Friday 266 points higher than Thursday’s rate. A rate fix under the 7.00 level helps China’s trading partners in the Asian region, most notably Australia which is China’s major trading partner.