Gold rises to its highest level after tensions between the United States and North Korea
The fiery Donald Trump would not leave things alone to the ravings of a mad man. After several threats from the North Korean Dictator Kim Jong-un, that he is prepared to launch a preemptive strike on the U.S. air base in Guam, Mr. Trump said that any kind of attack by North Korea on U.S. Assets will be met with “Fire, Fury, and frankly Power, something that the world has never seen before”.
The Markets reacted just as you would expect downward movement all the way. That was only exaggerated by the rather thin volumes that usually accompany the month of August. US indices are set for a sharply lower open (at least in recent market terms) following a steep decline in European stocks and a selloff in Asian shares.
The heightened geopolitical tensions between the US and North Korea dampened global risk sentiment, which snapped the DJIA’s streak of record closes and saw nearly all Asia-Pac bourses in negative territory.
Elsewhere, the Stoxx Europe 600 Index declined 0.6 % as of 9:54 a.m. in London, the largest drop in more than a week on a closing basis. The U.K.’s FTSE 100 Index declined 0.6 %, the first retreat in a week. Germany’s DAX Index sank 1.2 % in the biggest tumble in almost three weeks. Futures on the S&P 500 Index sank 0.4 %, the largest decrease in almost five weeks. The MSCI Emerging Market Index sank 0.9 %, the biggest dip in almost eight weeks.
In commodities, safe haven flow supporting precious metals with Gold prices up a modest 0.6%, while crude prices have recouped from yesterday’s lows following last night’s large drawdown in the API report. Saudi and Iraqi oil ministers are to hold a joint press conference on Thursday in an attempt to stabilize oil markets.
Risk aversion dominated trading as the Swiss franc and the yen led gains among Group-of-10 currencies, while the dollar index steadied as EM currencies halted a three-day rally. The yen appreciated as much as 0.8 percent to 128.61 per euro, its strongest level in three weeks. During previous occasions of political turmoil between the U.S. and North Korea, the Japanese currency over performed, yet the Swiss franc’s sharp decline in the past two weeks made for stretched positioning versus the euro, resulting in a bigger gain. The Australian dollar and New Zealand dollar both weakened. South Korea’s won fell to a three-week low amid heightened geopolitical tensions over North Korea.
Looking at the day ahead, there is the preliminary 2Q nonfarm productivity (0.7% expected) and unit labor costs (1% expected) data, final June wholesale inventories (0.6% expected) as well as the MBA mortgage applications. In Asia, Japan’s PPI for July will also be out on early Thursday morning. Notable US companies reporting today include Twenty First Century Fox.
Treasuries advanced as investors sought haven assets amid heightened geopolitical tensions after President Donald Trump said Kim Jong-un’s regime will face a devastating military strike if North Korea continues threatening the U.S. The Bloomberg Dollar Spot Index was little changed before data releases including wholesale inventories.
EURUSD – The JOLTS were so good that forced the pair lower towards the 1.1720. The pair is in consolidation zone at the moment with the 1.1720 on the lower bound and 1.1765 as the upper bound.
GBPUSD – Some strength was showing on the pair early European session but met resistance at the 55-EMA on the 1 Hour chart representing the 1.3020. The pair is currently experiencing more downward movement as it dropped below the 1.3000.
USDJPY – Fresh Demand for safe havens and particularly the YEN after the U.S. – North Korea tensions increased overnight. The pair has dropped to fresh August lows at 109.65 and seems to continue on the current trajectory should the current situation continue.
USDCAD – The slight upward trajectory on the pair is evident as it converges into an upward triangle. Today’s inventories from the EIA will surely affect the CAD again especially after the Oil market has regained its influence on the CAD.
AUDUSD – After reaching a one month low the pair has rebounded higher from the support at 0.7855. The 0.8000 remains the elusive trigger that could trigger much more upside for the pair as it trades near the 0.7890s.
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Dow Jones – Back below the 22,000 since the first time it broke through the level in August. The Futures of the Dow Jones show high levels of volatility as the VIX has reached higher after the geopolitical tensions.