Morning Commentary: Middle East Turmoil Rocks the Markets

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Middle East Turmoil Rocks the Markets Share this story: Alan Rose Foreign Exchange Senior Trader

Global markets are retreating today after news broke during the Asian session that the U.S. conducted a military strike in Iraq that killed a key Iranian General who was in charge of initiating counter-strikes against U.S. service personnel and diplomats. Markets are in risk-off mode and U.S. and global equity markets are reversing their sharp gains from yesterday. G7 interest rates are all sharply lower and oil and gold prices (near a 6-year high) have spiked higher but are off their best levels of the session. The U.S. dollar and Japanese yen have advanced higher due to safe haven demand while almost all other major and emerging market currencies are weaker in varying degrees. The Canadian dollar is near unchanged supported by higher oil prices.  While markets have reacted sharply this morning and are fearful of further escalation in tensions between the U.S. and Iran, markets have seen this movie of short term spikes in Middle East tensions. There have been previous episodes of increased tensions in the Middle East that have had short term impacts on the markets and then quickly subsided. Oil prices spiked higher by near 4% before correcting lower as there are numerous countries awaiting higher prices in order to produce more oil including the U.S. Innovations and technological advances regarding fracking has made U.S. fracking a key source of oil.  Key U.S. economic data comes out later this morning but markets will be monitoring events very closely in the Middle East as to whether there is further escalation of tensions that could have further ripple effects on the markets. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: The euro is weaker for the second day in a row as disappointing German data revealed both higher inflation and a higher job losses to close out 2019. Inflation accelerated from 1.2% in November to 1.5% in December and is the steepest increase since June. The jobs report showed that the number of people out of work was twice as high as expected with 8,000 job losses but the UR remaining at 5%. German factory employment had its worst year since the Great Recession.

If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!

Follow City National Bank on social media:

Non-deposit investment products: • Are not FDIC insured, • Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and • Are subject to investment risks, including possible loss of the principal invested. This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.

Unsubscribe from this list  |  Update email preferences This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list. Copyright ©2020 City National Bank – All Rights Reserved. 350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071 City National Bank is a subsidiary of Royal Bank of Canada. TERMS & CONDITIONS  |  PRIVACY STATEMENT NMLSR ID# 536994 | City National Bank Member FDIC