Unexpected 4th of July Fireworks

Unexpected 4th of July Fireworks

With the US markets closed for Fourth of July festivities, it was a somewhat directionless overnight session due to lack of participation, but the overriding tone is cautionary with a touch of risk off in the wake of a highly provocative  North Korean test of an intercontinental ballistic missile. A topic that will be atop of the G-20  agenda which begins on Friday as North Korea attempts to puts their ICBM and Nuclear-tipped bargaining chips on the table.

The escalation in geopolitical tensions was quickly tempered after Russia and China led the global outcry for both US and South Korea to agree to a Chinese-led de-escalation plan.With cooler heads prevailing, the market quickly retraced the original headline panicked clamouring for scarcely offered haven assets in holiday thinned-trading conditions.But given the immensity of this latest crisis and G20 looming we’ve not heard the last on this front. 

On the currency markets, there were pockets of interest as the CAD remained the markets darling thanks to both surging oil prices and the Bank of Canada’s  hawkish tone. While the Aussie fell out of favour after the RBA baulked at stepping in line with the chorus of hawkish  central banks and issued  more dovish than expected statement

Australian dollar

The Aussie remains on its back after a heavy sell-off when the  RBA failed to live up to expectations and join the policy convergence club that had traders clamouring for top side exposure in G-10 currencies believing formal policy coordination was afoot. While the global policy convergence narrative will eventually play out the  RBA  has quashed the notion of a consorted rate rise amongst global central banks.While the RBA stuck to their neutral guidance, there appears to be not one primary catalyst that has convinced the bank to alter that view and refused to remove the downside risk to interest rates 

It’s evident the short term market was disappointed after speculators succumbed to the allure of riding a wave of shifting policy, but regardless of the RBA latest musing the tide is turning on global easy money policy, and it might be too early to give up on the Aussie dollar just yet.



The Forex market is taking a breather conscious of some potentially bullish US$ risk events on the horizon; primarily FOMC minutes and US payroll data this Wednesday and Friday respectively. So we expect the EUR to remain rather rangy.

Japanese Yen

With risk aversion lingering, headline risk, and no shortage of,  will dominate USDJPY flow as we head towards Friday’s G20 summit keeping topside risk in check

Friday is looking l is looking like a very actionable day.

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.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes