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North Korea warns US of ‘greatest pain’

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USD

The Greenback recovered vs. a basket of major currencies rebounding from its lowest levels in more than two years as tensions over North Korea eased. Unlike expectations, North Korea celebrated the anniversary of its founding over the weekend without lunching any further missile or nuclear tests. On Friday, wholesale inventories increased by 0.6% against a predicted 0.4% increase while the consumer credit rose to 11.5 billion USD from 11.8 billion USD against a predicted 15.1 billion USD.

No reports are due from the US today, so traders remained cautious about the potential economic impact of Hurricane Irma.  Moving forward, markets are awaiting Federal Reserve meeting from Sept. 19 to 20 in Washington, as policy makers are expected to discuss balance sheet shrinkage and are widely expected keep interest rates unchanged.

  • The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.26%, to settle at 91.594 pips.

EUR

The common currency had a bit of a mixed run at the end of last week with traders booking profits from post-ECB rallies while data came in mostly as predicted.  French industrial production increased by 0.5% as predicted while the German trade balance fell below expectations with the surplus dropping to 19.5 billion EUR from 21.2 billion EUR. The single currency did though fall as much as 0.18%, to settle at $1.2007 vs. the Greenback after European Central Bank Executive Board member Benoit Coeure said that persistent exogenous shocks to the exchange rate could lead to unwarranted tightening of financial conditions with undesirable consequences for inflation. Such remarks came after Mario Draghi mentioned last week that the ECB could start tapering its massive stimulus program this autumn.

On the data front, the Italian industrial production data is on the tap today with a 0.5% drop expected.

GBP

The Sterling pound managed to settle above 1.300 levels, positively affected by strong UK data.  The UK's manufacturing output went against expectations and grew at the fastest pace this year in July.  Monthly production improved from 0% to 0.5%, while the yearly figure jumped from 0.6% to 1.9%. The goods trade deficit also came in at 11.6 billion GBP against a predicted 11.9 billion GBP shortfall.

There are no reports due today however moving forward, traders are waiting Britain’s August inflation report, which will be released on Tuesday. GBP/USD fell as much as -0.06%, to settle at $1.3189.

JPY

The Japanese currency strengthen against its peers on Friday however dropped back lower over the weekend owing to the lack of any negative news from North Korea. Though the situation continues to remain fluid, traders are waiting for another round of sanctions and its consequent reactions from Pyongyang. On the data front, Japan’s GDP reading fell to 0.6% from 1.0%. Preliminary machine tool orders, tertiary industry activity index and core machinery orders are due today.

Gold

Gold prices edged lower as the impact of Hurricane Irma was not as severe as expected so far and as a possible intercontinental ballistic missile test by North Korea at the weekend did not materialise. Gold Futures - Dec 17 fell as much as 0.66%, to settle at $ 1,342.22. Gold has been one of the best performers in recent weeks, as geopolitical unrest and a plunging dollar boosted demand for bullion.

Oil

North Korea has warned that it will inflict “the greatest pain and suffering” on the US if it continues to call for fresh sanctions in response to the regime’s sixth nuclear test last week. Washington wants the UN to support a halt to oil exports to North Korea.

Earlier today, Oil prices rose on news that Saudi Arabia's energy minister discussed with his Kazakh and Venezuelan counterparts, the possible extension of the global oil supply cut agreement beyond March 2018.

Meanwhile, markets are awaiting The Monthly Oil Market Report (MOMR) from OPEC and the International Energy Agency to assess global oil supply and demand levels. Such data will give investors a better picture of whether a global rebalancing is taking place in the oil market.

Crude Oil WTI rose as much as +0.82%, to settle at $ 47.87, while Brent Oil Futures - Nov 17 rose as much as 0.41%, to settle at $ 54.00.

The most important economic events:

  • USD New York Fed Survey of Consumer Expectations: (GMT 15:00) – Medium –
  • USD U.S. to Sell USD33 Bln 6-Month Bills: (GMT 15:30) – Medium

We wish you all the best in your trading activities. For any further assistance, please do not hesitate to contact us at clientservices@ICMCapital.co.uk

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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