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Gold stands tall on Rising US-North Korea Tensions

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USD

On Tuesday, the Greenback rose slightly vs. a basket of major currencies as the U.S. job openings unexpectedly jumped to a record high in June. Job openings grew in June, most notably through business services and professional by 179k. The NFIB Small Business Index and the IBD/TIPP Economic Optimism Index also came in stronger than expected.  Meanwhile, traders are eagerly focusing on U.S. inflation reports due later in the week, for clues on whether the recovery in the Greenback is sustainable in the longer run. Final wholesale inventories, preliminary non-farm productivity, and unit labor costs are lined up next. 

  • The U.S. dollar index (DXY), which measures the Greenback against a basket of currencies, fell as much as 0.2%, to settle at 93.59, after touching an 11-day peak of 93.876 overnight.

EUR

The common currency pulled back again the greenback and the yen. However it did strength against commodity currencies as risk appetite weakened. On the data front, ECB tapering speculations were supported by German and French trade balances coming in slightly higher than expected. On the tap, we have the Italian industrial production report due today with an increase of 0.2% predicted.

GBP

The British currency continued to be burdened with Brexit concerns and risk aversion as no major data from the country allowed an uptick. There are no reports due today either, so market sentiment will most likely determine the currency’s direction.

JPY

The Japanese yen rose to an eight-week high against vs. the Greenback, thanks to the geopolitical tensions between the Korean Peninsula and the United States. The U.S. dollar fell as much as 0.3%, to settle at 109.980 yen, following a retreat to 109.740, its lowest level since 15th June.

On the economic calendar for Wednesday, JPY Machine Orders (YoY), which shows the movements in tool orders by manufacturers, are expected to fall to -1.1%. Technically, the Japanese yen could hit new highs due to the current war of words between Washington and Pyongyang.

Gold

Earlier today, Gold prices edged higher on tensions between the United States and North Korea after the North has responded to warnings from U.S. President with a threat to strike the U.S. territory of Guam, which is located in the Pacific.

The precious metal rose as much as 0.3%, to settle at $1,264.50, while U.S. gold futures for December delivery up to $1,270.40. Technically, it could hit new highs as geopolitical worries can promote demand for safe haven assets such as gold. Meanwhile, traders are also awaiting U.S. inflation for clues on when the U.S. Federal Reserve would begin cutting its $4.2 trillion bond portfolios.

Oil

Oil prices extended declines for a third day, as exports from major OPEC producers increased. In addition, OPEC's efforts to limit supply were negatively affected by the recovery in Libya's oil output and higher production in Nigeria.

After two days of meetings in Abu Dhabi, Officials from OPEC and non-OPEC technical committee, said yesterday that they expect more adherence to the pact to cut 1.8 million bpd in production. The American Petroleum Institute that the U.S. crude stockpiles declined by 7.8 million barrels last week. Only the EIA report is due today, which is expected to show a decrease of 2.2 million barrels.

West Texas Intermediate for September delivery fell as much as 12 cents, to settle at $49.05 a barrel.

The most important economic events:

  • NZD Reserve Bank of New Zealand Rate Decision (AUG 10): (GMT 21:00) – important – Forecast (1.75%) – Previous (1.75%).
  • NZD RBNZ's Wheeler news conference on policy statement: (GMT 23:01)
  • GBP RICS House Price Balance (JUL): (GMT 21:00) – important – Forecast (9%) – Previous (7%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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