Risk-off back on Full Steam on North Korean news

USD

On Tuesday, the greenback declined to a four-month low vs. the yen after North Korea test-fired a ballistic missile that passed over Japan's northern island of Hokkaido.

The U.S. dollar has been under strong selling pressure over the year due to uncertainty over the economic agenda of Donald Trump's administration and amid doubts that the Federal Reserve will raise its benchmark interest rate for the third time before the end of the year.

On the release front, the U.S. goods trade deficit rose in July as exports declined, suggesting that trade could make a modest contribution to the U.S. economic growth in the third quarter.  The Commerce Department reported yesterday that the commodities trade gap rose as much as 1.7% to $65.1 billion in July and Exports fell as much as 1.3%, heavily burdened by an 8.0% tumble in shipments of motor vehicles.

• The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell as much as -0.48%, to settle at 91.77 pips.

EUR

The common currency was mostly trading higher against its competitors as it acted as a safe-haven in the European region. Data from the region came out actually weaker than predicted but traders remained bullish as European Central Bank President Mario Draghi refrained from talking down the currency. The euro hit $1.20 for the first time since January 2015 rising as much as +0.68% vs. the greenback, to settle at 1.2060. The French consumer spending and preliminary GDP data up today in addition to the German Gfk consumer climate index.

GBP

The British pound was able to recover as Brexit worries have begun to fade slightly with talks underway. No reports came out of the UK economy yesterday, as the markets were closed for the UK summer bank holiday. The Sterling did though experience a further uptick versus its American counterpart regaining the 1.2950 level driven by a fresh round of selling of the greenback. This was on the back of the N. Korea and also concerns over the economic consequences of Hurricane Harvey. On the tap, only the Nationwide HPI is due today with analysts expecting to see a 0.1% increase in house prices.

JPY

Economic data out of Japan took a back seat as risk off sentiment came back in to play on the back of the latest reports of North Korea firing several missiles. One of these fell into the waters just of Hokkaido in Japan, after breaking into three pieces. Safe heavens such as the yen rallied as investors liquidated their investments in higher yielding currencies, equities and oil. The greenback fell to a four month low against the yen dropping to 108.33.

On the economic data front, Japanese household spending data is due today with a decrease to 0.8% from 2.3% forecast. The unemployment rate is also on the tap with no change expected from the earlier 2.8% figure. The Bank of Japan will also print its core CPI figures. A substantial increase in the figure may result in the decrease of government bond purchases.

Gold

Earlier today, gold prices edged up for a third consecutive session to their highest levels in almost ten months as geopolitical tensions escalated due to the launch of a North Korean missiles, causing an increase in demand for safe-haven assets.

The momentum has helped spot gold build on overnight strength to cross the key $1,300 psychological level and rise as much as 0.6%, to settle at $1,316.90. Earlier it had touched its highest since Nov. 9 at $1,322.33, while Gold Futures - Dec 17 rose as much as 0.87%, to settle at 1,326.71.

Oil

Oil prices rose as Tropical Storm Harvey enforced many refineries in the U.S. Gulf Coast to shut down, while prices were also backed by disruptions in Libya and Colombia. Hurricane Harvey hit the Texas Gulf Coast late Friday as a Category 4 hurricane. It is the strongest hurricane to hit Texas in more than 50 years with the rains having devastated the area with huge floods.

U.S. West Texas Intermediate (WTI) crude rose as much as +0.21%, to settle at $ 46.67, while fell as much as -0.04%, to settle at $51.40.

The most important economic events:

• USD S&P CoreLogic CS 20-City (MoM) SA (JUN): (GMT 13:00) – Medium – Forecast (0.1%) – Previous (0.1%).
• USD S&P/Case-Shiller Composite-20 (YoY) (JUN): (GMT 13:00) – Medium – Forecast (5.6%) – Previous (5.69%).
• USD Consumer Confidence (AUG): (GMT 13:00) – Medium – Forecast (120.6) – Previous (121.1).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.