FxWirePro: Key Determinants of Financial, FX & Commodity Spaces For Q1’2020

Those who are coming back to the office today following their break are likely to be surprised about the levels in EURUSD. The pair has surged today about 0.44%, currently trading at 1.1240 levels. 

While the precious yellow metal has surged to a fresh six and a half year highs on the back of the U.S. airstrike killed one of Iran’s commando in chief, Qassem Soleimani, who happened to be a senior Iranian influential military official, the news bolstered the apprehensions in the Middle East.

Qassem headed militias that fortified Iran’s power, is shot dead in a drone attack in Baghdad authorized by Trump, the Defence Department reported late Thursday. 

As a result, almost entire precious metal and the energy commodity markets have surged in green including gold and crude. Gold (XAUUSD) has risen about 3.29% in two days, while WTI and Brent rose by 5% each within a spur of the moment. While the Silver, Platinum and Palladium prices are no exception, they also have advanced.

Financial, FX and Commodities markets enter 2020 more hesitantly than they ended 2019 given mediocre activity data and mixed policy developments in the monetary and geopolitical spheres. This edition reviews six turn-of-year issues that will shape returns in Q1, including:

1) The US airstrike on Iraq and re-escalation with Iran;

2) This month’s pullback in manufacturing PMIs; 

3) Further China monetary easing; 

4) The minor details on a US-China trade accord; 

5) UK parliamentary approval of a Withdrawal Agreement that prohibits extending the transition period beyond 2020; and 

6) Trump’s impeachment. Qualitatively, these seem either low-impact, offsetting or manageable. Thus we stay long cyclical assets broadly, and are only hedged for downside via Energy over-weights in Equities, Credit and FX. Courtesy: JPM