Wednesday’s Top 10 Affecting FX, Bonds and Equities

1. Safe Haven demands ease, although investors continue to keep a close eye on developments in Syria.

2. Geopolitical issues have made it more difficult for fundamental data or events to have a “true” impact. Rising tension in the Middle East is dominating sentiment as investors, so far this week, have shied away from assets perceived as risky – The issue is not about any US led coalition action against Syria for using chemical weapons on its own people. It’s far more sensitive than that. The real reason is what an attack might lead to?

3. US Pending Home Sales falls -1.3%, beating the -1% expectations. Last week’s plunge in US new home sales led the Tsy yields to rally year high rates.

4. Higher rates, US tapering under data scrutiny have the Dollar and Yen trading a tad higher versus the EUR. Euro-zone private sector lending fell in July. Short GBP positions ahead of a speech from the BoE Governor Carney were punished on delivery.

5. BoE’s Carney is prepared to inject fresh stimulus into the British economy if rising global rates threaten the UK’s fledgling economy – dismissing raising the BoE’s benchmark rates sooner – “Lower rates for longer.” The benchmark to stay at +0.5% until UE is +7%.

6. Even with eyes on Syria, US Treasury rally breaks (10’s move from 2.71% out to +2.75%) as market prepares for $35b 5-year note auction at 1:00pm EST. Yield direction continues to hinge on US data that should shape the Fed’s timetable.

7. The probability of the US using military action is not making equity investors particularly optimistic. Yesterday’s global heavy selloff following geopolitical tension is expected to remain as the dominant theme – however, light trading volumes ahead of North America’s long labor day weekend is also exaggerating the impact of fears over Syria.

8. Crude Oil has gained sharply for a second day (WTI $110) on the possibility of Syrian military intervention, with Brent having appreciated just under +6% since Monday’s close. Watch for the reaction of possible military action vs. the probability of sanctions?

9. Gold is being used as a hedge against escalating geopolitical tensions in Syria and the potential inflationary impact of higher crude prices. Gold prices have officially returned to bull market territory this morning $1,427, rallying just under +2% this week so far.

10. The US Comex gold futures have advanced for three-consecutive weeks, rebounding +20.4% since the commodity’s trough in late June. Year-to-date, prices have declined -15.3%. The fear of an allied strike against Syria within days has prices of most “safer havens” assets, including gold and US Treasuries, remaining better bid.

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell