Geo-political concerns could weigh on markets

January 25, 2019

Not a lot of crucial economic data due today but events away from data could weigh on markets.

The EURUSD copped a beating overnight after ECB President Mario Draghi’s monetary policy speech. He mentioned that the central bank still saw some weaknesses in the European economy and weak growth. The euro opened at $1.13805 and bumped up to an early high of $1.13907. It remained near those levels for a few hours before beginning a steep decline mid-session. Draghi’s speech saw a quick drop to $1.13051 before a rally shortly afterwards saw the pair climb to $1.13801. However, the euro gave up those gains almost as quick as it fell to lows of $1.12881. It is not far off those lows, currently trading at $1.13014. The GBPUSD was more fortunate, although it opened and closed rather flat. The pair opened at $1.30664 and climbed to an early high of $1.30939. Like the euro, the pound remained near those highs for a few hours before the decline started. Mid-session trading saw the pair fall to a low of $1.301036 but it showed some resilience as it climbed to back to near it’s opening price. It is currently trading at $1.30628.

The Dow traded in a tight range yesterday, taking a break from the larger movements we saw the day before. The index opened at 24,543.02 and jumped to an early high of 24635.76. From there, it remained steady until late trading saw the Dow drop to a low of 24,411.12. It has bounce off those lows and is currently trading at 24,495.83. The Dax bucked the trend, reversing some of the losses sustained earlier in the week. The German index opened at 11,077.04 and dipped to an early low of 11,030.34. It was a bit of a roller coaster, but the Dax climbed to a late high of 11,161.34 before closing at 11,154.34.

The day ahead could shape up as a volatile one as we head into the weekend. Plenty of events around the world could send particular markets wild, one way or another. There is talk that a deal is close to re-open the government in the US. This could see a rally in the markets, or it could be another false start and markets continue doing what they’re doing now. Brexit negotiations continue to simmer in the background, while a potential crisis looms in Venezuela. The main political opposition figure to the Venezuelan President has declared himself as interim President on the back of claims of corruption in the current administration. Several nations, including the US, have recognised him as the interim leader, despite the current leader, Nicolas Maduro remaining in power. This could affect oil prices as Venezuela sits on the world’s largest oil reserves. Further sanctions may be imposed on Venezuela while there is also a risk of civil unrest in the oil-rich nation.

Data released today includes:

All – World Economic Forum continues

UK – High Street Lending, CBI Realised Sales

Europe – German Ifo Business Climate, Belgian NBB Business Climate


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