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The Dollar Falls After North Korea's Nuclear Test

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USD

On Monday, the Greenback declined vs. a basket of major currencies on renewed geopolitical tensions after North Korea’s blast. Meanwhile, U.S. President Donald Trump has refused to rule out military action and threatened to cut off trade with any country doing business with North Korea. U.S. Defense Secretary James Mattis said Trump asked to be briefed on all available military options. With no important data from the U.S. economy today, the U.S. dollar's move will depend on the reaction of markets to geopolitical events.

The U.S. dollar traded lower as the U.S. non-farm report showed that the U.S. job growth declined in August after two straight months of robust gains did little to alter market anticipations that the Federal Reserve may wait until around mid-2018 before raising interest rates again.

  • The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.24%, to settle at 92.587 pips.

EUR

The single currency rose as much as +0.42%, to settle at $ 1.1910 EUR, staying below a 2-1/2-year high of $1.2070 set last week.

JPY

The yen jumped vs. the Greenback on Monday, as traders reduced their exposure to riskier assets after North Korea's nuclear test. The JPY’s hike came as traders sold riskier assets. The dollar fell to as low as 109.47 yen in early trade, down -0.72% cent from levels seen in late US trade on Friday. 

Gold

Gold prices rose to their highest levels in nearly 12 months as traders shifted to safe-haven assets after North Korea's latest and most powerful nuclear test. Meanwhile, traders continued to digest lower-than-expected U.S. employment data, which kept anticipations muted for another interest rate hike before the end of the year. Although, it is widely anticipated that the Federal Reserve could start the process of lowering its balance sheet before year-end, investors are still skeptical it will hike interest rates this year, due to worries over the subdued inflation outlook.

Spot gold rose as much as 0.7% to $1,333.28 per ounce, while Gold Futures - Dec 17 (GCZ7) rose as much as +0.97%, to settle at $1,343.32.

Oil

Earlier today, Oil prices edged lower as traders turned away from crude markets into gold futures, after North Korea carried out its strongest nuclear test yet. Brent crude futures LCOc1, fell as much as 0.83% to settle at $ 52.31, while Crude Oil WTI settled at $47.28, down by 0.02%.

The most important economic events:

  • GBP Markit/CIPS UK Construction PMI (AUG): (GMT 08:30) – Medium – Forecast (52) – Previous (51.9).
  • EUR Euro-Zone Producer Price Index (MoM) (JUL): (GMT 09:00) – Medium – Forecast (0.1%) – Previous (-0.1%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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