It’s a Mad, Mad, Mad, Mad, World
The markets are unsettled this morning with traders dwelling on the questionable North Korea headline about testing a long-range missile soon. With Columbus day and the anniversary of the founding of the North Korean communist party in sight, the market is back on headline watch, However, dealers will probably need some actionable convincing that geopolitical risk is on the rise again.
Turkey
Turkish -US relations took a turn for the worse over the weekend. The US is reportedly suspending non-immigrant visa services at its diplomatic facilities in Turkey following the arrest of a consulate employee, prompting Turkey to halt visa services in the U.S.
This latest escalation adds more fuel to the fire after tension was nearing a boil the over US support for Syrian Kurdish militants in the war against ISIS, who Turkey views as a terrorist group.
USDTRY is off 3.0 % in early trade exacerbated by weak liquidity conditions at the open and what was available as it was priced at unwarranted premiums. All too typical on Interbank electronic FX platforms these days. However, as Tokyo comes into the fray TRYJPY liquidity is returning to normal and turn over is very high.
New Zealand
NZ election is back on investors radar screens when special votes were counted on Saturday. At the crux of the issue: opposition party wants to remould the RBNZ to include more independent private sector business types in policy decision process. Whichever way you want to read into that, it does imply a level of uncertainty regarding the future course of monetary policy, but as we all know what business person is every in favour of paying higher interest rates on loans. So by extension, I view the other side of the flow even more dovish than the New Acting Governor Spencer who is a carbon copy of Wheeler and cut from the same cloth.
The UK and Continent
May’s calamitous Conservative party conference speech continues to weigh like a nightmare on the Pound. While the frenzied calls for her resignation have tempered, political risks and the lack of Brexit headway are most significant negatives underlying GBP. UK politics is a mess and unlikely to get any cleaner.
EU political risk continues to simmer over the Catalan independence debate. The market may be underpriced large on this risk event so EURUSD should remain on offer until cooler heads prevail
US Dollar
US CPI is the focal point of this week early. After August CPI surprise, the worm may be turning as markets look for convincing from this weeks headline.
