Crude oil and safe havens rise while stocks fall on geopolitical tensions
The price of crude oil and safe havens rose while that of stocks declined after the latest escalation between the United States and Iran. The price of oil rose by more than 5% while safe havens like gold and the Japanese yen rose by 1.60% and 0.50% respectively. In Europe, the DAX, CAC, and Stoxx 50 indices declined by 245, 35, and 45 points respectively. In the United States, futures tied to the Dow and the Nasdaq declined by 290 and 115 points respectively.
Tensions between the United States and Iran after President Trump exited the Iran nuclear deal increased in December when an American contractor was killed in Iraq. The US responded by bombing camps of the militia that is said to have killed the contractor. In response, the militia attacked the American embassy in Iraq last week. The killing of Qassem Soleimani, an influential military officer, means that the crisis in the Middle East will continue. It also means that many Americans and American institutions in the region are not safe.
The sterling declined today even as the market received important data from the country. Housing data from Nationwide showed that house prices increased from 0.8% in November to 1.4% in December. Mortgage lending increased to GBP 4.05 billion in November while mortgage approvals increased from 64.66k to 64.99k. On the negative side, the construction PMI declined from 45.3 to 44.4 in December. The weakness in the British pound was likely because of fears that the country will not have reached a trade deal with the European Union by the end of the year.
The euro declined as the market received mixed economic data from Europe. In Germany, the unemployment change rose by 8k. This was worse than the expected 2k. The unemployment rate remained unchanged at 5.0%. In the EU, the money supply increased by 5.6% in November. This was lower than the consensus estimates of 5.7%. In Germany, preliminary CPI data showed that consumer prices rose by an annualized rate of 1.5% in December. This was higher than the consensus estimates of 1.4%. The harmonized consumer prices rose by an annualized rate of 1.5%.
The EUR/USD continued the decline that was started yesterday when the pair was trading at 1.1240. The pair reached a low of 1.1125, which is slightly below the 61.8% Fibonacci Retracement level. The 14-day and 28-day exponential moving averages made a bearish crossover yesterday while the RSI has moved to the oversold level. The accumulation/distribution indicator has continued to move lower. This means that the pair may continue moving lower.
The XBR/USD pair rose today in reaction to the heightening tensions between the United States and Iran. The pair rose to a high of 69.23, which was the highest level since June 2019. On the daily chart, the price is above the 14-day and 28-day moving averages. The RSI has moved to the overbought level of 70 while the momentum indicator has continued to rise. The pair may continue moving higher although volatility will remain.
The GBP/USD pair continued the decline that was started yesterday when the pair was trading at 1.3285. The pair reached a low of 1.3050. The price is below the Ichimoku cloud, and below the 14-day and 28-day moving averages. The pair may continue moving lower during the American session. If it does, it will likely test the important support of 1.3000.