View from London: Currencies, Countries, Leaders Are Tested Today
08/29/2017 2:52 am EST
The biggest issue for trading the markets today is about rates and how they play out in a market running for cover. The 2.10% and 2.05% 10Y US bond yields are the next big levels to watch, writes Bob Savage, CEO of Track Research in his Tuesday commentary from London.
This is supposed to be the last week of holidays but the stress of the world keeps leaking into markets. Geopolitics trumps economics.
The North Korean launch of a missile over Japan ratchets up tensions in the region and tests the restraint of the U.S.
Japan calls for an emergency UN Security Council meeting today to discuss further actions. Japan’s spokesman Suga noted that while North Korea has made multiple threats and missile launches since last year, a missile flying over Japanese territory is unprecedented, a grave and serious threat to the nation’s safety.
The contrast of South Korea and Japan vs. China responses are notable. Risk-off can be seen in the scramble to own safe-havens like the Japanese yen (JPY/USD), Gold and bonds.
The USD is off dramatically in the process along with many stock markets. The USD weakness is driving not just on geopolitics but also domestic doubts about Trump and his leadership – the “fire and fury” comments from two weeks ago are clashing with Tillerson’s push for diplomacy just yesterday.
The economic data is going to be important but we don’t know that until Friday.
The UK is also on the ropes as it sees the euro/British pound (EUR/GBP) over 0.93 as Davis hopes for a softer more flexible EU dashed from Juncker comments today.
The race to the bottom for forex is now between the British pound (GBP/USD) and the USD with the U.S. clearly winning.
The biggest issue for trading the markets today is about rates and how they play out in a market running for cover. The 2.10% and 2.05% 10Y U.S. bond yields are the next big levels to watch.