Markets brush off latest Israel/Iran attacks

Good morning

GBPUSD traded to 1.3305 and EURUSD to 1.1500 yesterday morning as the US dollar continued its move higher, led by both geopolitical risks and the suggestion of a US rate rise later this month.  However through the afternoon we did see a slightly weaker US dollar which took GBPUSD back to the mid-1.33’s and EURUSD to mid-1.15’s.  Oil prices are lower again, back to levels close to the close last week, equities have recovered well and bond yields are generally off their recent highs although do remain elevated. 

The market seems to have forgotten the latest skirmish between Iran and Israel and instead is focussing on Trump’s comments that we’ll have peace within a couple of weeks, as well as his suggestion that he told Israel to hold off on further attacks on Lebanon in order to help the peace process.  Reports are though that Israel has ordered the evacuation of the Lebanese city of Tyre as they continue to seek out Hezbollah fighters.

Even if we do get peace soon, the global impact of the war will be felt for a long time to come.  Markets are pricing in almost a full one percent of rate rises from the Fed this year.  Not sure Warsh will be Trump’s favourite person if that happens, even though it’s not of his making.  Still, Trump isn’t exactly everyone’s favourite person himself, having been booed at an NBA match by fans who had to wait in a queue for several hours due to extensive security checks.

But all in all, everything is pretty much as we were.  Not a great deal of other news to offer, GBPUSD a touch higher at 1.3365, EURUSD 1.1540 which puts GBPEUR at 1.1580, a level just 30-40 pips off the highs since last July.  USDJPY holds above 160, now 160.20 with GBPJPY around 214.00.  GBPAUD and GBPNZD are 1.8950 and 2.2930, the former at it’s highest level for a couple of months. 

Not much on the calendar today, markets will be looking forward to US CPI inflation data tomorrow which could really cement the idea that the Fed will raise rates next week. 

Have a great day…

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