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
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