Geopolitical Concerns Weigh on Risk Appetite

Risk aversion is once again the name of the game on Thursday, as geopolitical tensions mount and investors head for cover in the traditional safe havens.

Gold and the Yen Extend Gains in Risk Averse Trading

The war of words taking place between the US and North Korea at the moment, which includes very real threats of action, is taking its toll on investor sentiment. The level of risk aversion we’re seeing suggests traders still believe the prospect of military action is very small but precautions are still being taken none-the-less, as this still has the potential to escalate very quickly and unexpectedly.

Standard safe haven instruments are still being preferred at this point, with the yen well bid against its peers and Gold a little higher after seeing strong gains on Wednesday, while equities are getting no love.

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US futures are pointing to a negative open on Wall Street for a third consecutive session, coming on the back of new record highs being set after a very good earnings season. While companies are continuing to report in the background, it is clearly being overshadowed by geopolitics.

DAX Losses Continue as Geopolitical Tensions Continue

Oil Hits 10-Week Highs on Inventory Numbers and Saudi Reports

Oil is trading higher again on Thursday, buoyed by the inventory numbers reported this week and reports that Saudi Arabia is ready to cut supplies to Asia in an attempt to drain stores further. Geopolitics is also likely playing a small part as well, lifting Brent crude through its recent resistance to trade at fresh 10-week highs. While WTI is lagging behind a little, the moves of the last couple of days suggest $55 could be on the cards for Brent, at which point buying appetite will be tested once again.

William Dudley’s Comments Closely Monitored

Things will pick up a little on the economic data side today, although attention here is very much on tomorrow’s inflation numbers. PPI inflation data and jobless claims will both be released shortly before the US open, as will GDP data for the UK from NIESR. The GDP estimate covers the three months to the end of July so gives us an indication of how the UK started the third quarter. William Dudley – President of the New York Fed – will also be making an appearance on Thursday, which will be monitored very closely as he’s believed to hold similar views as – and be a close ally of – Fed Chair Janet Yellen.

North Korea Nerves Weigh on Equities again, Dollar and Gold Higher

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.