US CENTCOM says it ends latest round of strikes targeting Iran

Sagar Dua FXStreet

The United States (US) military's Central Command (CENTCOM) confirms that it conducted another set of strikes against Iran at 10 PM ET on July 14. The CENTCOM said that it struck dozens of military sites near the Strait of Hormuz, a critical chokepoint to almost 20% of the global energy supply and the Iranian coast. US fighter jets, drones, and naval ships fired precision munitions at Iranian missile and drone locations.

Market reaction

The US Dollar (USD) is under pressure despite the US CENTCOM confirming strikes on dozens of Iranian targets. At press time, the US Dollar Index (DXY) trades 0.17% lower to near 100.77.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

GBP/USD gains traction above 1.3400 as softer US CPI dampens Fed rate hike expectations

The GBP/USD pair gains ground to near 1.3405 during the early Asian session on Wednesday. The US dollar weakens against the British Pound as softer-than-expected US inflation in June tempered expectations for US Federal Reserve policy tightening. The release of the US June Producer Price Index report will be in the spotlight later in the day.

EUR/USD gathers strength above 1.1400 after soft US inflation data

The EUR/USD pair gains ground to near 1.1425 during the early Asian trading hours on Wednesday. The US Dollar weakens against the Euro as softer-than-expected US inflation data temporarily eased pressure on the Federal Reserve. Traders will take more cues from the US Producer Price Index report, which is due on Wednesday.

Gold remains a ‘sell-on-rise’ trade amid US-Iran hostilities

Gold is resuming its downtrend toward two-week lows near $3,985 early Wednesday, following a temporary pullback seen on Tuesday, as there seems to be no end to the renewed hostilities between the United States and Iran concerning the Strait of Hormuz.

Hyperliquid representatives, Trade[XYZ] meet SEC Crypto Task Force to discuss digital asset regulation

The US Securities and Exchange Commission's Crypto Task Force met with representatives from the Hyperliquid Policy Center, XYZ Ltd., which operates Trade[XYZ] and Sullivan & Cromwell LLP to discuss regulatory approaches to digital assets, according to a memorandum released Tuesday.

2% and nothing else: Why Warsh gave Congress three hours of Greenspan

The Federal Reserve Chair who wants the institution to say less spent Tuesday legally required to say more, on the one morning the data handed him something pleasant to say. June's Consumer Price Index fell 0.4% on the month, the steepest single-month decline since April 2020.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.