Published: December 30th, 2019
– As expected, the Christmas Season ushered in thinned markets. However, the lull was such that not even the announcements that the Yuan is about to be internationalized, or the that the signing of Phase 1 of the Sino-USA trade deal was on the offing could make things bright. The gloom notwithstanding, market players believe the trade agreement will balance the Forex market and that China will slowly but steadily heighten the convertibility of the Yuan in 2020 henceforth.
Despite the good news coming out of Beijing and Washington, the forex markets registered lackluster trading sessions with most majors posting thin trading ranges. The USD/JPY pair, for instance, traded flat below 109.50 while the Aussie could only manage the 0.69 handle, a drop from the weekly tops.
And while this dip is significant, the next few days are going to get even gloomier because inactivity Christmas has a direct adverse effect on the liquidity. The major Forex trading centers in Australasia were all closed on diverse days during the festive season. Singapore on December 25, 2019, while Hong Kong, New Zealand, and Australia were closed for business on December 25 and 26. Only Japan remained wholly operational during this season.
Going into December 25, most traders anticipated the markets to remain closed during Christmas Day. Because of the closure, and the normal lull that precedes Christmas, the trading was generally dull. The Greenback ended the week trailing the major currencies.
Throughout the week, however, the pound was the weakest. The pressures imposed on the currency by the prospects of a hard Brexit seem too stubborn to leave. Besides, assertions by the Irish Prime Minister Leo Varadkar that Boris Johnson was committed to a harder Brexit than everyone anticipated must have compounded the harm.
Despite the slumping trade and the dismal performance of the dollar, Wall Street kept rallying, with most US indexes reaching record highs. Even the US Treasury returns rose, posting modest gains in the intraday trades.
While the US Equities impressed, the pound kept swimming deeper towards the unfriendly end of the pool. Friday, December 27, however, saw the currency’s fate turn around as it clawed its way back to 1.30. It will be interesting to see how it weathers the storm at the beginning of 2020.
The biggest gainers of the dollar’s slump were crude oil and Gold. The former recovered within range while the latter managed to surge to a 2-week high, hitting 1,486.15 and hanging in the neighbourhoods of these figures.
President Trump gave Americans a befitting Season’s gift by announcing on the eve of Christmas that he and Chinese President Xi Jinping will hold a signing ceremony for Phase I of the US-China trade deal. The specifics of the agreement were arrived at during the second week of December.
Trade representatives from both sides confirmed that the signing ceremony shall be held during the first week of January. And, while the US party seems upbeat, the Chinese side is a little cagey, preferring to play their cards close to their chest.
Asked to confirm the specifics of the deal, which the US negotiation party had released to the public, the spokesman for the Commerce Ministry of China said the shall be divulged to the public only after the deal is officially signed.
Despite making this news of the signing public, the markets did not respond with corresponding enthusiasm. However, the slow mood in the market that is characteristic of the Christmas season. As the new year begins, it will be interesting to see the effects that the anticipation of the signing will have on the Forex trading centers.
As 2019 comes to a close, the weakness of the dollar leads the way in defining the status of Forex trading. The Greenback has continued its plunge in the thin trading that has characterized these last days of the year.
The Euro/USD stood at 1.120 while the USD/GBP gained some to reach a two-week high of 1.310. There are concerns, however, that the ghosts of the Brexit confusion shall come to haunt the sterling and erode whatever little gains that the currency has raked in in the last few days.
The Australian dollar is the best performing currency swinging in the neighbourhoods of 0.700 to the Greenback. Cryptocurrencies, on the other hand, have not been impressive. Despite an earlier prediction of a possible bull run for the world’s first cryptocurrency, it was not able to sustain the $7,500 range. It, instead, slumped to trade at $7,200 on average. By the late hours of Sunday, the cryptocurrency was exchanging at $7,367.61.
Gold and crude oil posted mixed returns. While the former consolidated to reach $1,500 for a troy ounce, the latter slumped in the initial days of trading on December 27, but later regained. The drop in the price of crude oil is, however, inconsistent with the happenings. The US Crude oil stockpiles went down to 5.4 million during the week ending December 20, and the market expected the asset to maintain a steady climb.
By the close of business on Saturday, the only other true gainers joining the league of the Australian dollar were the US Equities. They hovered around the closing price of the previous day but ended the day clocking near record highs.
As the year 2019 comes to an end, the Forex trading floors of the world close with the usual sluggish pace. However, the outlook points to a new year with more vibrant markets. The news of a possible deal between the US and China, in particular, heralds the beginning of an exciting period devoid of the anxiety and uncertainty that has characterized Q3 and Q4 of 2019. In Europe, however, not all is rosy since the UK confirmed that it is embarking on a hard Brexit. The news is expected to hit the pound even harder.