Weekly Market Wrap 06/01/2020-10/01/2020

Marius Paun | London, UK | Senior dealer | Friday, 10th January 2020

The week started with tensions escalating between the US and Iran. President Donald Trump threatened to strike Tehran in a disproportionate manner should any US person or target get hit. However, Iran could not be seen to be doing anything and retaliated by hitting the Baghdad Green Zone of the US embassy in a rocket attack. Things seemed to escalate as Washington denied an entry visa to Iran’s foreign minister. Furthermore, Tehran said they will abandon the nuclear deal it had with the UN.

By Wednesday afternoon Trump issued a statement promising that Iran will never be allowed to have nuclear weapons. He added that no American was harmed in the missiles attack and that Iran appears to be standing down. Markets took that as a sign of de-escalation.

Meanwhile, on the domestic front, the US ISM non-manufacturing index surpassed expectations at 55 vs 54.5. For the job market though things did not look as good. December non-farm payrolls data disappointed with only 145,000 jobs being added versus predictions for growth of 160,000. Additionally, average hourly earnings rose by just 2.9%, below projections of 3.1%. What’s interesting is that despite the geopolitical tensions, the US indices have made fresh all-time highs for the last two sessions.

Although we’re getting close to the date of signing the phase one deal (15th January), there are reports that China will actually not increase its import purchases of US agricultural goods.

Back in the UK Parliament, the House of Commons voted 330 to 231 in favour of a bill to allow Britain to leave EU on January 31. The pound sterling finished the week slightly lower, trading around 1.3050 to the US dollar, going into the close.

The new European Commission president Ursula von der Leyen said ‘there is not enough time for a full UK-EU deal by the end of 2020’. Her comments reignited concerns that the risk of a no-deal exit is now back on the table.

Australia continues to make the headlines due to the bushfires which have devastated the country. So much so that Goldman Sachs assessed the impact and predicted bushfires will cut 0.3% from GDP. The negative impact could be partially offset by a boost in government spending although a drag on tourism is undoubtedly expected. After coming within touching distance from 0.7 to the US dollar, the Australian dollar has posted the second weekly decline, trading now below 0.69.