Safe-Havens Rise as Middle East Tensions Heat Up

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Safe-Havens Rise as Middle East Tensions Heat Up

JANUARY 03, 2020

The U.S. dollar and the safe-haven Japanese yen are up significantly this morning as geopolitical events sparked a rush to safety.

Overview

A U.S. airstrike killed a top Iranian general in Bagdad.  While the action will be heavily debated on cable news and internet comment sections, the market’s knee-jerk reaction is crystal clear.  Global equity markets are all in the red this morning, the price of oil has surged 4.0% and traditional safe-haven assets including gold have risen.  Iran has threatened “severe” retaliation.

Fundamental data might be overshadowed today but there is manufacturing data that is worth noting.  ISM manufacturing is expected to show a continued contraction in the sector with a reading of 49.0 at 10 a.m.  A reading under 50 shows a contraction.  Later, the minutes of the latest FOMC meeting will be released.

What to Watch Today…

  • ISM Manufacturing at 10 a.m.

Complete Economic Calendar can be found here.

EUR

The Euro, British pound and the rest of the G10 currencies, save the Japanese yen, are under pressure this morning due to geopolitical events in the Middle East.  The sterling fell the most against the U.S. dollar, erasing some of its strong gains from the first half of the week.  The Euro is also under pressure but remains on track for a weekly gain versus the greenback.

JPY

The Japanese yen rallied alongside other haven assets overnight, pushing to its strongest level since November 1.  Heightened tensions in the middle east and worries over an armed conflict are pushing yen’s strength.  Japan is also in the middle of a week-long holiday which limits yen liquidity and allows for more aggressive swings.  Markets in Japan will reopen on Monday.

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