Geopolitical tensions are what is driving the markets at the moment, which started after the US attacked Syria after the chemical gas attack last week. This has led to a deteriorating relationship between the US and Russia which was confirmed during the meeting yesterday between both foreign ministers.
North Korea is also very much in focus as the US has sent a carrier strike group towards the Peninsula and North Korea is seen as possibly preparing for another nuclear test, which would bring tensions to a boiling point and could occur as soon as this weekend.
President Trump also said that he sees the USD as being too strong as that hurts the competitiveness of the US and he would like to see the interest rate as remaining low.
Currencies
EUR/USD – was trading at the lowest level in a month after the declines over the last 2 weeks, but this week it is moving up as the USD continues to weaken. The EUR will remain interesting as we have the French elections coming up soon as well (on the 23rd).
USD/JPY – after breaking below the support around the 110 level which was able to hold over the last weeks, we have seen a continued drop. The JPY strengthens amid rising geopolitical tensions such as Syria and North Korea and uncertainty, which makes the JPY very attractive as a safe haven, and in addition the USD is on the backfoot as well.
GBP/USD – had to contend with the resistance around the 1.249 level again, but the comments from President Trump that he sees the USD as too strong helped to weaken the USD and led to a break of the resistance level.
AUD/USD – has moved up sharply after the comments from President Trump about the USD and continued this after strong employment data out of Australia and also good data out of China, both strengthening the AUD.
USD/CAD – dropped sharply yesterday as the BOC kept the interest unchanged as expected, and the BOC said that while they could lower the interest rate if needed, that this is unlikely to be the case. We can see that we broke below the support around the 1.329 level as also the comments from President Trump helped to drop further.
Litecoin – continues to be very volatile as the likelihood for the use of Segwit increases and this causes Litecoin to soar as well.
Indices
Dollar Index – President Trump’s comments that the USD is too strong in his opinion and that he would like to see the interest remain low have caused the Dollar Index to drop below the 100 level again to reach the lowest level this month.
S&P 500 – is dropping still, as a lot of things are lining up for a possible steeper decline. We have data out of the US that could point to slower growth, earning season that kicks off now as well as the geopolitical tension.
T-Notes – are on the rise in recent weeks as the weakness of the USD and global uncertainty makes this now a more attractive alternative as it is a safe haven which causes the yields to go down and the price therefore up. Also helping is the fact that President Trump aid that he would like to see the interest rate remain low.
Commodities
Gold – the geopolitical tensions between the US and Russia, Syria and North Korea which continue to increase and remain high have caused gold to soar to the highest level in 5 months. On top of that, the French elections are also approaching fast and is also causing some concern. In addition to the weakening USD obviously also plays a role.
Oil – even though the inventories declined a bit from its record high, the fact that production in the US continued to increase to the highest level in well over a year and also that the stockpiles in Cushing, Oklahoma, the largest storage hub increased caused oil to move down. The fact that OPEC is still on track to reach its commitment under the production cut agreement did little to the price of oil, as more focus is on the question if they will extend the cut or not. We should know more soon, as OPEC is scheduled to meet later this month to discuss this very thing. What also helped oil to decline is that fact that we were trading near a resistance area around the 54 level.
Stocks
Citigroup (NYSE:C) – will report its earnings today.
JP Morgan – will report its earnings today.
Tesco (LON:TSCO) – even though it reported better than expected earnings, it still dropped in trading yesterday as the company is still dealing with fines and compensation payments, but it appears the company is on the right track in recent quarters.
