USD/PKR Gives up Earlier Gains as Markets Stabilize after Iran Retaliation

Wednesday’s trade saw USD/PKR within the range 154.80-155.14.

The pair closed flat at 154.80. Geopolitical developments continued to weigh on market sentiment during Asian and early European trading hours. Iran said it had launched missiles against US targets in Iraq in response to the US drone attack on Friday that killed the Iranian military head Soleimani. The news triggered immediate sell-off of riskier assets.

However, Twitter posts from both sides gave way to the perception that further escalation of tensions was not likely. US President Trump wrote that a damage assessment was “So far, so good!”, while adding “all is well”.

Iran’s Foreign Minister Mohammad Javad Zarif wrote that the assault was “proportionate” and that the country did not seek “escalation or war”.

Later on Wednesday, in a statement from the White House, Trump said Iranian missile strikes on US bases in Iraq had not led to any casualties on US side and inflicted minimal damage.

”Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world,” he said.

Trump also noted the US did not necessarily have to use military power against the Islamic country.

On the macroeconomic front, the monthly report by ADP showed US private payrolls had increased by 202 000 jobs in December, well above market consensus and following a revised up job growth of 124 000 in November. December’s gain in jobs has been the largest since April. The official government report on US employment for December is expected on Friday.

The US Dollar Index was 0.06% weaker to 97.26 in late Asian trade on Thursday, being close to a near two-week high of 97.35.

At 13:00 GMT today Fed’s Vice Chair Richard Clarida is expected to speak on US Economic Outlook and Monetary Policy before the Council on Foreign Relations in New York. His remarks may heighten USD volatility.

At 13:30 GMT the US Labor Department will report on jobless claims. The number of people in the country, who filed for unemployment assistance for the first time during the business week ended January 3rd, probably remained at 222 000, according to expectations, or unchanged compared to the preceding week. A smaller number of claims would support USD, suggesting a healthy labor market.

USD/PKR was up 0.03% to 154.85 in early London hours on Thursday.

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