Overnight we have seen an escalation in the tensions in the Middle East, Iran ordered missile attacks on two bases hosting US troops in retaliation for killing of General Qasem Soleimani. President Trump tweeted “All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good!” The reaction in the currency market has been limited so far, however the retaliation has taken its toll in other markets, with oil spiking close to 1.5% overnight. The market will watch in particular for reaction when the US opens this afternoon and for any further comments from US officials.
Economic data from the US fell under the radar with news from the Middle East dominating airwaves. Data was generally positive as the US trade deficit declined to a 3-year low and the ISM non-manufacturing index strengthened.
Looking to the day ahead, the market will be focused on rhetoric from US officials with regards to the overnight bombings. In terms of economic data, the ADP report will provide the market with an early indication of how the all-important US labour data could post on Friday. The market pays attention to the reading but doesn’t often move on the back of the figure due to the inconsistency seen compared to the government numbers.
PM Johnson's Meeting With EU Commission President Von der Leyen to Impact Sterling Rates
The Brexit Withdrawal Bill returned to the House of Commons with the committee stage due to be discussed until Thursday Amendments. From a Brexit perspective the market, will monitor Prime Minister Johnson's meeting with EU Commission President Ursula Von der Leyen later today to scrutinize for clues how the path of the Brexit transition period could go.
Positive Signs From the EU Economy
There were further positive signs for Eurozone as the CPI inflation rate increased to 1.3% for December from 1.0% (in line with expectations). In addition, Eurozone retail sales data beat market expectations with a 1.0% monthly increase and annual gain of 2.2%.