US equities have consistently hit new record highs, including on the first
trading day of the New Year but trading FX last year was an exercise in both
patience and timing with depressed currency volatility going hand-in-hand
with trading ranges in most Dollar-crosses narrowing sharply compared to
2018.
But the past 24 hours have seen far greater volatility and arguably
uncertainty. The price of Brent crude oil, which was broadly stable in the
second half of December, has spiked 4.5% as has S&P 500 volatility, in the
wake of a deadly US air strike in Iraq on Iran’s military commander, General
Qasem Soleimani.
The Dollar weakened about 0.7% last year in trade-weighted terms but has
today reversed most of this loss as markets digest the possible implications
of the US killing General Qasem Soleimani on neutral soil. Markets have
understandably paid little attention to weak US ISM manufacturing PMI data
for December, released this afternoon.
