US President Donald Trump says US will start guiding trapped ships through Hormuz — Bloomberg

Lallalit Srijandorn FXStreet

US President Donald Trump said the United States (US) will begin guiding some neutral ships trapped in the Persian Gulf out through the Strait of Hormuz beginning Monday, Bloomberg reported on Sunday.

“The Ship movement is merely meant to free up people, companies, and Countries that have done absolutely nothing wrong — They are victims of circumstance,” said Trump in a social media post. “If, in any way, this Humanitarian process is interfered with, that interference will, unfortunately, have to be dealt with forcefully,” Trump added.

According to the Wall Street Journal, which cited an unnamed US official, this new effort does not currently involve US Navy escorts but rather a coordination process for countries, insurance companies and shipping organizations.

Key quotes

US forces to start supporting project Monday to restore commercial shipping freedom through Strait of Hormuz.

Mission ordered by president will aid merchant ships seeking free passage through vital international trade route.

Progress is going very well.

Market reaction

At the time of writing, the West Texas Intermediate (WTI) is down 1.05% on the day at $98.20.

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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