Risk Aversion Seen on US, North Korea Tensions

We’re seeing significant risk aversion in the markets on Wednesday, with the escalation in tensions between the US and North Korea triggering moves into safe haven assets.

Gold, Yen and Swiss Franc Benefit From Safe Haven Flows

Equity markets in Europe are down more than 1% in most cases and Wall Street is also facing a negative open, as investors turn away from perceived riskier instruments in favour of the traditional safe havens. Gold – the ultimate safe haven instrument – is up around 0.6% so far on the day and could extend these gains if investor sentiment continues to deteriorate.

The yen, despite Japan being in the thick of it, is also seeing plenty of safe haven flows although it’s the Swiss Franc which is proving to be the biggest winner in all of this, trading around 1% higher against the US dollar, euro and pound. It will be interesting to see if the yen maintains its safe haven status should this continue to escalate into something far more serious than just the war of words it currently is.

CAC Slides as North Korea Rumbles Spook Investors

EIA Data Could Trigger Next Upside Move in Oil

Oil is trading a little higher again on the day, possibly spurred on a little by the latest verbal sparring between Donald Trump and North Korea. Still, it continues to trade a little off the highs of the last week or so, with $53 still proving a strong barrier to the upside in Brent and $50 doing likewise in WTI. EIA may provide the necessary catalyst for a test of this later on in the day, especially if we see a number in line with last night’s API report.

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US Productivity and Labour Costs of Interest Ahead of Friday’s Inflation Report

US data is looking a little light once again, although as we saw on Tuesday, even numbers that aren’t typically associated with big market moves can take their toll. The JOLTS number further highlighted the diminishing slack in the US labour market that should drive higher wages in the not too distant future, although it’s worth noting that this is something the Fed has been expecting for some time as the unemployment number has continued to decline. Today’s numbers from the US come in the form of non-farm productivity and unit labour costs, both of which should theoretically, at least, be a key indicator of future wage and inflation trend. More good numbers here could trigger similar moves to those we saw yesterday, particularly with the dollar continuing to look very oversold.

Source – Thomson Reuters Eikon

War Rhetoric has Dollar, Bonds and Gold Bid, Stocks lower

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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.