Market fears spiked after the New York close as Iran launched retaliatory missile strikes on US airbases in Iraq.

After relative calm during Tuesday, market fears spiked again after the New York close as Iran launched retaliatory missile strikes on US airbases in Iraq.

Defensive assets drew fresh support, although a measured initial US reaction helped calm fears and risk assets pared losses in choppy trading with USD/JPY back above 108.00. Global equity markets overall registered limited net losses with buying on dips.

The dollar was able to post net gains with a solid ISM services release, although a lack of demand for other major currencies was a key element. Sterling reversed initial sharp gains with GBP/USD posting net losses in choppy trading.

Commodity currencies lost ground with the Australian dollar notably vulnerable.  Oil prices spiked to fresh 8-month highs with WTI above $65.0 p/b before correcting lower amid hopes that regional supply disruptions would still be avoided.

Precious metals also spiked higher with gold posting fresh 6-year highs above $1,600 per ounce before a correction.

Sterling pushed sharply higher ahead of the New York open with a GBP/EUR dip below the 1.1800 level triggering sharp stop-loss selling. The government announcement that it would halt preparations for a no-deal Brexit helped support investor sentiment. GBP/USD also pushed above 1.32 against the dollar but failed to hold the advance. There was a sharp reversal ahead of the New York open with GBP/USD moving into negative territory close to 1.3100 against the firm US dollar.

The Brexit Withdrawal Bill returned to the House of Commons with the committee stage due to be discussed until Thursday Amendments have no real chance of approval given the government’s large majority, limiting the potential impact.

There will be choppy trading on Middle East developments and Brexit developments will also be significant with Prime Minister Johnson meeting EU Commission President von der Leyen on Wednesday as GBP/EUR traded just below 1.1800 with GBP/USD around 1.3130.

Economic Calendar

07:00German Factory Orders (M/M)(NOV, 2019)0.20%-0.40%
07:45Consumer Confidence(NOV, 2019)103106
08:30GBP Halifax HPI (M/M)(DEC, 2019)-1.00%
10:00Euro-Zone Consumer Confidence(DEC, 2019)-7.2-8.1
12:00USD MBA Mortgage Applications--5.30%
13:15USD ADP Employment Change(DEC, 2019)150K67K
15:30USD Crude Oil Inventories-4.064M-11.463M
20:00USD Consumer Credit(NOV, 2019)16.70B18.91B
21:30AiG Construction Index(DEC, 2019)-40

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.