Summary:

• JPY and CHF are in demand following North Korean foreign minister’s announcement
• New Zealand dollar takes a breather on risk-off mode and general election tomorrow
• OPEC/non-OPEC joint ministerial monitoring committee meets today

While there was no macroeconomic data published overnight, North Korean foreign minister brought some volatility across financial markets as he warned that Pyongyang could test a powerful nuclear weapon (a hydrogen bomb) over the Pacific Ocean in response to US President Donald Trump’s threats of military action. According to CNN, the country’s foreign minister, Ri Yong Ho, told reporters in New York the ultimate decision was up to the regime’s boss Kim Jong Un. Notice, that Ri Yon Ho was scheduled to address the United Nations General Assembly later in the day but he dropped out.

There is nothing amazing that those remarks have resulted in an increased demand for the safe haven assets such as JPY and CHF. The former is gaining as much as 0.55% against the US dollar. On top of that, gold prices are trading higher 0.5% or $6.3 on the day. In turn, the New Zealand dollar is by far the worst performing currency today. It’s losing ground for two reasons: a risk-off mode and risks related to the general election which will take place tomorrow. Even as the latest polls suggest that the ruling National Party ought to achieve a required majority of votes to win, the jury is decisively still out as an advantage over the Labor equals 6pp while there were as much as 20pp two months ago.

The USDJPY has bounced off the past resistance on renewed North Korea-related geopolitical risks. A deeper move towards 111 could be an interesting buying opportunity. Source: xStation5

It’s worth noticing while the USDJPY has slid quite noticeably, the US 10Y yield has lost just 2 bps suggesting that risks are rather subdued. If so, a knee-jerk reaction should be wiped off quite quickly as it took place in the past.

Moreover, the OPEC/non-OPEC Joint Ministerial Monitoring Committee will meet today in Vienna. While it’s unlikely the agreement on a potential extension of the ongoing deal will be achieved, some discussions might take place. Thus, keep a close eye on that event because oil prices could respond. As for now, WTI is upping 0.2% while the Brent grade is treading water. Bear in mind that the next full OPEC summit is scheduled on November 30.