A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Escalate to De-escalate
Share this story:
Andrew Kositkun Foreign Exchange Head Trader
Prior to last night, Iran’s response to the US’ actions in the Middle East had been fairly symbolic. That all changed when Iran fired over a dozen missiles at US-Iraqi military bases last night. At the end of the day, it isn’t a surprise that Iran responded to the killing of top Iranian General Qassem Soleimani. The main question was how Iran would respond.
Based off comments from the Iraqi PM’s office, there were no casualties which, upon review, appears to be no accident and provides a path for de-escalation. According to Iraqi Prime Minister Adel Abdul Mahdi’s office, Iran gave prior notice of the strike. This implies that the Islamic Republic retaliation was a carefully coordinated effort to both satisfy the domestic outrage as well as provide a path to de-escalation.
Notably, Iranian Foreign Minister Javad Zarif tweeted that Iran had “concluded proportionate measures” with President Trump responding with a relatively muted “All is well!” tweet. These statements could indicate that last night’s action could be the extent of Iran’s military response and there might not be an immediate response from the US.
This evolution in the world’s understanding of last night’s events played out in the price action of safe haven assets. Initially after news of the strike broke, the yen, Swiss franc and gold all spiked higher. Within a relatively short period of time, all these assets gave back nearly all of their gains and are currently sitting around where they were before the attack. A similar story can be seen with European and US equities and oil as both asset classes are well off their session lows, indicating that market consensus still believes major escalation is unlikely. Given this, President Trump is scheduled to make a statement on Iran at 8 A.M. Pacific Time, so stay tuned.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
The US ADP jobs report came in at 202k, which beat expectations for a 160k print. Additionally, last month’s number was revised up significantly from 67k to 124k. As a reminder, the government’s jobs report is due this Friday.
German factory orders came in much weaker than expected, printing -1.3% versus expectations for a 0.2% gain. While this data series is a volatile one, it does add to concerns that Europe’s largest economy is still struggling to recover.
Japanese wage data come in softer than expected, falling 0.2% against expectations for a 0.1% decline.
In the UK, BOE Governor Carney made dovish comments, noting that the bank can still cut rates further and that his successor will have all monetary tools at his disposal. However, Carney did admit central banks have much less ammunition now. Additionally, UK PM Johnson and new EC President von der Leyen will meet today, exposing the GBP to headline risk.
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.
View this email in your browser Want to watch a recording of yesterday's Simply Successful Investing Webinar. Just click here and use passcode 5q59Z&3M.
Tune in for a guide to ETFs and investing strategies for potential long-term success. View in a browser Fidelity Fidelity Log in Creating a portfolio with ETFs: Why and how Creating a portfolio with ETFs: Why and how
Comments
Post a Comment