The North Korean thread has drawn most of attention thus far as country has launched another ballistic missile. It brought about a wave of risk-off across financial markets where the Swiss franc, Japanese yen and gold have been the most beneficiaries. The Switzerland currency is gaining as much as 1.2% against the US dollar, the Japanese one is rising 0.6% while gold prices are going up 0.8% (it’s been even a larger gain).
Elsewhere, the European equity markets have started off on the wrong foot and a rout has even deepened since then. Even as there were no missile tests after the UN Security Council imposed some sanctions at the beginning of this month. Today’s move has been seen by investors as another step taken by the Kim Jong Un’s regime towards a nuclear war. It’s been enough to spook investors from riskier assets.
There is no doubt that declines on the DAX (DE30 on xStation5) have been exaggerated by the rising euro which has continued its rapid increase amid mounting geopolitical tensions. The EURUSD has already broken through 1.20 handle and could be on the rise in the nearest future. Having said that, the ECB’s meeting scheduled for September could be a big event given a sharp increase seen in the common currency so far. Keep in mind that the speculative positioning stays on its highs, hence a possible pullback could be mighty.
Moves across the cryptocurrency market tend to be huge, hence a yesterday’s spike seen on Ripple couldn’t have been surprising. The fourth-largest digital currency in terms of capitalization surged yesterday evening from under $0.2 to above $0.24. That amazing increase could have been attributed to rumors which came in at the same time. Those concerned that Ripple would enter the Chinese market. Even as they were not official, it was sufficient to exert hefty upward pressure on the price.
Looking forward, there is a light macro calendar with just the US Conference Board releasing its monthly Consumer Confidence Index reading shortly after the US market opening. Let us point out that some strategists are expecting to see a pickup after a slight decline.