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Geopolitical risk rattles's markets, safe havens receive a boost

Posted on: August 29, 2017

Just when you may have thought the situation in North Korea was settling down a bit, Kim Jong-un decided to rattle the sabers yesterday afternoon by firing a missile right over Japan. This act of defiance surprised markets and sparked a flight to quality with JPY and CHF the beneficiaries while the USD sold off. EURUSD blew right through stops above 1.2000 as the straight line upwards continues despite positioning being stretched to extremes.

The CAD reaction was generally muted, with USDCAD trading higher on the initial news before USD selling against the crosses gave CAD a boost. CAD positioning mains significantly skewed to the longs as investors look to get in or stay in ahead of a Bank of Canada rate hike. With US rate hike probabilities shrinking and oil hanging in despite hurricane Harvey, the data will tell the story this week. Support remains strong in the band between 1.2414/1.2434 so for USD buyers it may be a good idea to pick up some dollars down here ahead of that level. For sellers, a weak GDP print on Thursday may be enough to spark a USDCAD short squeeze as participants take the September meeting off the table.

In other news, Tajikistan is making its debut in the bond market with its first dollar bond offering. This will be the first emerging-market sovereign debt deal since the summer break, which will be sure to test investor's risk appetite. Similar issues from emerging and frontier economies such as Belarus yielding 7.625% are expected to act as a reference for the pricing of the Tajikistan bond.

  • Yesterday's NA 1.2444 - 1.2510
  • Asia 1.2483 - 1.2534
  • London 1.2442 - 1.2490


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