RECAP

These guys just won’t quit, will they? Trump and Kim seem intent on sending each other and every single person on this planet into a post-nuclear type of world. After Donald Trump’s “Fire and Fury” speech, North Korea’s Supreme Leader Kim Jong-un wouldn’t leave things as he revealed a plan to fire 4 ballistic missiles at Guam by Mid-August.

This whole geopolitical diplomatic fiasco has resulted in the Europe Stoxx 600 Index heading for a second day of declines, following declines in Hong Kong, Tokyo, and Sydney Markets, which in turn forced S&P 500 Futures to drop as well. Euro-Area volatility has been forced higher as well with the VStoxx Index surging 27% since Tuesday’s close.

Stoxx 600 fell 0.6%, set for its biggest back-to-back declines in three weeks, as the DAX hits its lowest level since April 21, down 2% so far this week. All European industry groups declined, with miners and energy shares faring the worst.  Utilities outperform selloff; the sector is recommended by HSBC as a defensive refuge should European equities undergo a correction.

In other news, the Economic Calendar in Europe had something important to release which was the U.K. Manufacturing Production. Before the actual release of data, the GBP witnessed a big sell-off triggered by leveraged sellers. The Actual figure came out at 0.0% as expected; however, there was a revision higher to -0.1% of the previous figure from -0.2%. The GBP responded well as it rose higher on the back of positive revision and not even glancing at the Goods Trade Balance which came in at -12.7 Billion versus -11.0 Billion expected.

In commodities, safe haven gold rose 0.1 % to $1,278.04 an ounce, the strongest in two months. West Texas Intermediate crude climbed 0.4 % to $49.75 a barrel, the highest in more than a week, while Brent traded 0.8%, to $53.20.

In currencies, the NZD was the notable underperformer overnight post the RBNZ monetary policy decision. The rate decision itself was met with choppy price action. USD at better levels against its counterparts today, tensions remain at elevated levels between the US and North Korea, although the focus is slightly edging towards key US data with US CPI figures to be released tomorrow. GBP saw a brief uptick to pare some of its losses this morning following firm than expected industrial output figures, however much of the other data had been erring on the softer side with the trade balance showing a wider deficit than analysts had expected.

OUTLOOK

Looking at the day ahead, there is the July PPI data (for core, 0.2% mom and 2.1% YoY expected), the monthly budget statement (-$54bn) as well as the initial jobless claims and continuing claims figures. Onto other events, the Fed’s Dudley will speak today. Notable companies reporting include Macy’s and NewsCorp in the US and ABN Amro in the Netherlands.

TRADERS VIEW

The Bloomberg Dollar Spot Index rose for the fifth day as North Korea tensions eased slightly ahead of a report on U.S. producer prices and a speech by New York Federal Reserve President William Dudley.

U.S. Dollar – The greenback was stronger against most of its Group-of-10 peers, with leveraged accounts driving the moves amid relatively low interest from interbank and macro accounts. Dollar positioning remains short, with leveraged funds being the most bearish on the U.S. currency since early 2013.

EURUSD – The euro was sold off at any attempt to rally and was down by as much as 0.4% to 1.1709 low; positioning is lighter after Wednesday’s wash out below 1.1700 while order books are now more balanced with strong support seen at 1.1650-80 and offer accumulating above 1.1770.

GBPUSD – The Sterling was consistently defensive since London open on fast-money selling as it dropped to the day’s low of 1.2952; the pound managed to recover and trim a good part of the losses as it rose to 1.2989, still 0.1% lower on the day, as industrial production beat forecasts to rise 0.5% in June.

NOKSEK – The Norwegian krone rallied on the back of higher inflation while the Swedish krone drew support from stronger industrial production; NOKSEK is 0.3% lower at 1.0249, flirts with a close below the 21-DMA, currently at 1.0254 for the first time since July 2017.

NZDUSD – The New Zealand dollar led losses in the G-10 land on RBNZ language shift as a lower dollar is now “needed” instead of “would be helpful”.

Dow Jones – Breaking below the 22,000 has given a lot of downward pressure from the whole North Korea debacle as it stays below and eyes the 21,900.