Safe haven assets, such as the Swiss franc, yen and gold were in demand, as Trump cranks up warmonger rhetoric versus North Korea

Aug 10 • Morning Roll Call • 149 Views • No Comments

It’s been a few weeks since a verbal outburst, or an ill advised tweet from the USA president, moved our markets. Readers may recall that, shortly after Trump’s inauguration, we warned that another economic category should be added to the calendar, to contend with Trump’s tweets or outbursts, given his ability to move markets with just one of his knee jerk reactions. Rather than simply ignore North Korea and use diplomatic channels through China, to control and contain any supposed threat, Trump threatened North Korea with an outburst similar to Jules from Pulp Fiction; “And I will strike down upon thee with great vengeance and furious anger those who would attempt to poison and destroy my brothers. And you will know my name is the Lord when I lay my vengeance upon thee.”

Having begun the sabre rattling on Tuesday night, causing a late market sell off, the U.S. and world markets reacted negatively to the political situation on Wednesday, causing USD/CHF to fall by circa 1%, to 0.9638. The Swissie enjoyed a day of gains versus all its peers, as the pattern versus the U.S. dollar was repeated versus sterling, euro and Aussie. Only versus yen was the reaction moderated, as the yen also acted as a safe haven in the Asian continent. One benefit of Trump’s tub thumping; we now know where to park our savings if (when) a nuclear holocaust fries half the planet; gold, silver, Swiss francs and yen, that’s assuming a coherent global economy can rise from the radioactive rubble.

In terms of USA economic calendar news on Wednesday, oil and gas inventories fell sharply, WTI oil rose by approx. 0.4% at $49.85 per barrel, wholesale trade sales and inventories beat forecasts, whilst mortgage applications came in at 3% growth. From Canada building starts and permits also beat forecasts. The DJIA and the main USA equity markets recovered most of their early losses, selling off by 0.17%, SPX fell 0.04% and the NASDAQ closed down circa 0.28%. The VIX, the volatility or fear index, rose by over 10%. USD/JPY fell by circa 0.3% to 109.76. EUR/JPY ended the day down to approx. 129.08, EUR/CHF down circa 1.0% at 1.1323. With the exception of the Swissie and yen, sterling also enjoyed a (mostly) positive day, versus its main peers. Gold rose to a circa eight week high, to close the day out above R2, at circa $1276 per ounce, up approx. 1%, reaching a daily high of $1278.

Early Wednesday morning Chinese CPI data came in just below forecast at 1.4% YoY, whilst producer prices fell to a 5.5% YoY increase. Japanese machine orders reported a fall, as did Australian home loans registered in June. There was very little European economic calendar news published on Wednesday, however, investors also indulged in risk off behaviour and European equities slumped; STOXX 50 closing down 1.34%, DAX down 1.12%, CAC down 1.4% and FTSE 100 down 0.59%.

Significant economic calendar events for August 10th, all times quoted are London (GMT) time

08:30, currency impacted GBP. Industrial Production (YoY) (JUN). The forecast is for a modest improvement to -0.1%, from the -0.2% reading in May.

08:30, currency impacted GBP. Manufacturing Production (YoY) (JUN). The prediction is for an increase in growth to 0.6%, from 0.4% in May.

08:30, currency impacted GBP. Construction Output SA (YoY) (JUN). The expectation is for a considerable increase to 1.8%, from the -0.3% figure registered in May.

08:30, currency impacted GBP. Visible Trade Balance (Pounds) (JUN). The forecast is for a modest improvement to -£11,000m, from -£11,863m in May.

12:30, currency impacted CAD. New Housing Price Index (YoY) (JUN). YoY house prices are predicted to reveal similar levels of growth, to the 3.8% recorded in May.

12:30, currency impacted USD. Initial Jobless Claims (AUG 05). Initial claims are forecast to come in at 240k, similar to last week’s figure.

12:30, currency impacted USD. Continuing Claims (JUL 29). The expectation is for a fall to 1960k, from 1968k.

12:30, currency impacted USD. PPI Ex Food and Energy (YoY) (JUL). There is a raft of PPI data published for the USA economy on Thursday, the leading PPI figure is predicted to rise to 2.1%, from the 1.9% recorded in June.

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