The Day So Far…
North Korea remains the major talking point in what otherwise remains fairly subdued trading conditions. Rex Tillerson, the US Secretary of State, did his best yesterday to temper the situation suggesting that “Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days“. This was followed by an equally conciliatory tone from the Chinese Foreign Ministry. Personally, I feel if the calendar were more busy and if it wasn’t the middle of the summer season then markets would have moved on already from this news. I am however mindful of not becoming too complacent on a situation which obviously could carry cataclysmic consequences. One thing I am monitoring closely is the strategic movement of US military forces in the region. This morning Reuters reported that a US Navy destroyer carried our a “freedom of navigation operation”, coming within 12 nautical miles of an artificial island built up by China in the South China Sea.
Although this hasn’t impacted the market directly if this type of manoeuvring were to happen in the East China Sea then I would expect the North Korean threat of targeting the Pacific Island of Guam to intensify very quickly.
In the FX space, GBP has managed to claw back losses seen early in the session with Manufacturing Output Y/Y for June coming in above expectations despite the UK trade deficit swelling to an eight-month high as exports continue to decline. Meanwhile, all remains quiet on the Brexit front with the press amplifying the split within the cabinet on the best course of action but even the hard-line group is now said to accept the need for a pragmatic approach, according to the FT.
The Day Ahead…
US PPI and weekly Jobless Claims are due for release this afternoon, neither of which we are expecting to create much movement, with the greater focus on tomorrow’s release of US CPI data. Meanwhile, although Korean tensions appear to have dissipated we remain vigilant to any breaking news or rumours regarding the situation and of course any Trump tweets are to be monitored intently.
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