All Eyes on What Is Trump Going to Do. U.S. dollar slipped against havens after North Korea's foreign minister said in a statement at the U.N. that U.S. President Donald Trump's tweets over the weekend were tantamount to a declaration of war and that Pyongyang reserved the right to take countermeasures, including shooting down U.S. bombers even if they are not in its air space. The greenback was previously buoyed, helped by weakness in the euro following the outcome of the German general election. Later in the session, the data calendar heats up in the United States with the release of the CaseShiller house price index, new home sales, Conference Board consumer confidence index and Richmond Fed manufacturing index. On the US Fed front, chair Janet Yellen will also speak later in a day.
Euro Struggles Near Four-Week Lows vs Dollar. The euro fell 0.89 percent to $1.1835 after German elections showed that support for Chancellor Angela Merkel's conservative party fell to its lowest since 1949 and got additional pressure from ECB President Mario Draghi speech on Monday, where he singled out currency volatility as a source of uncertainty that required monitoring.
Investors Fled to Safe Assets After Combative Comments from North Korea. The yen and franc have been the main beneficiaries of the risk-off flows so far, with the former shrugging off uncertainty from the snap elections and the latter no longer as worried about SNB intervention as it used to be. The Japanese yen strengthened 0.24 percent at 111.73 per dollar and the Swiss franc gained about 0.3 percent overnight touching its four-day high versus the greenback.
The Kiwi Seemed Most Vulnerable Due to Election and Risk-off Flows. The kiwi lost 1.1 percent as it reeled from the political uncertainty in New Zealand and the return in risk-off vibes. New Zealand election left the ruling National Party short of the necessary votes to rule without forming a coalition. Traders are also likely pricing in downbeat expectations for the RBNZ statement later this week.
Aussie Weakened, Weighed Down by Renewed Political Concerns. The Australian dollar lost ground, reflecting an escalation in tensions between North Korea and the United States. In response to the accusation that the US had declared war on North Korea, White House press secretary Sarah Sanders said on Monday that it was “absurd”. While plenty of words have been exchanged between the two sides in recent months, this latest spat appears to be a further escalation in rhetoric, ensuring that riskier assets, including the Australian dollar, came under pressure during the session. Although the Aussie lost ground against the yen and US dollar, it rallied against the euro and New Zealand dollar following inconclusive election results in both nations last weekend.
Canadian Dollar Weakens as Investors Position Ahead of Poloz Speech. The Canadian dollar weakened on Monday against a broadly stronger U.S. dollar as investors positioned themselves ahead of a busy week that includes a speech by BoC Governor Stephen Poloz on Wednesday and a slew of speeches by U.S. Fed officials.
Gold Inches Lower as U.S. Dollar Steadies. Gold edged lower early Tuesday on a firmer U.S. dollar, but held not far off levels touched in the previous session when it rose more than 1 percent on geopolitical tensions over the Korean peninsula.
Oil Price Hits All Year High $58 Per Barrel. Brent oil futures touched a more-than-2-year high after major producers said the crude market was on track to rebalance and Turkey threatened to cut oil flows from Iraq's Kurdistan region toward its ports. “If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market,” Commerzbank said in a note. U.S. crude rose 2.96 percent to $52.16 per barrel and Brent was last at $58.63, up 3.92 percent on the day.
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16:45 pm GMT: USD Fed's Yellen Speech