Allies against Syria, possible consequences for Sunday opening
|- Safe-havens set to gap higher at the weekly opening.
- High-yielding assets to come under pressure, but EUR and GBP may not see large drops.
Late Friday in the US and well after financial markets closed, news indicated that the US, France, and the UK launched strikes on Syria, in response to the chemical attack to local civilians, allegedly made by President Bashar al-Assad. US President Trump announced the strike on targets "associated with the chemical weapon capabilities of Syrian dictator." Despite not participating in the event, Germany supported the attack as Chancellor Angela Merkel said that the strikes were "necessary and appropriate."
Russian answer was immediate to defend its ally, Syria, not only menacing with an armed response, but President Putin also said that this act will only exacerbate the humanitarian catastrophe in the country.
For the financial world, this means one thing: risk aversion. Investors have been on their toes amid political jitters fueling uncertainty, and this is just another trigger for such negative sentiment that will likely result in gaps across the different trading boards in favor of safe-havens and against high yielding assets.
Strength is particularly expected for the JPY and gold, while equities and European currencies could open lower. Given that this conflict Is focused on an oil-producer county may result in decreasing supply, meaning oil prices should rally through their recent highs. That could put the CAD on the run, but for the Aussie, an oil rally won't be enough, and would rather take clues from equities.
Finally, and with the dollar being the less attractive currency across the board and while the EUR and the GBP may come under pressure, no big fireworks are expected there.
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