USD and Stocks Drop After Iraq Airstrike Announcement

August 8, 2014 Share Print 0

World shares and the dollar tumbled on Friday and oil and gold jumped after U.S. President Barack Obama authorized targeted air strikes in Iraq, stoking fears of another drawn-out conflict in the region.

Fighting also resumed in Gaza between Palestinian militants and Israel while NATO’s calls for Russia to “step back from the brink” of war in Ukraine were still ringing in ears of volatile markets.

“Earlier this week, one Iraqi in the area cried to the world, ‘There is no one coming to help’,” said Obama, who has been reluctant to go back into Iraq having withdrawn in 2011. “Well, today America is coming to help.”

Global share markets had already been heading for a second week of straight losses but the latest developments sparked a fresh sell-off.

European stocks were down almost 1 percent by mid-morning after similar falls in Asian markets overnight. Futures markets pointed to a 0.5 percent drop for Wall Street when trading restarts.

“Risk aversion reigns, risk aversion rules,” said Kit Juckes, Head of Currency Strategy at Societe Generale in London.

“The prospect of air strikes in northern Iraq on top of the tensions in Ukraine and Gaza … across the board we have stocks weaker, bonds are stronger, the dollar is weaker and the yen is strongest of all.”

via Reuters

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.