09 Aug 2017

Market Brief: another day, another threat from Trump

Kevin Musisi

Dealing team

There was a little more action yesterday evening in financial markets with President Trump warning that North Korea will face a devastating military strike if it continues to threaten the US.

Latest rates   Today's data release
GBP/USD GBP/EUR GBP/AUD GBP/AUD GBP/CHF 12:00 US MBA mortgage approvals
1.3023 1.1082 1.6509 1.6514 1.2617 13:30 US non-farm payrolls productivity
GBP/JPY GBP/HKD GBP/ZAR EUR/USD EUR/GBP 13:30 US unit labour costs
143.21 10.1780 17.4509 1.1755 0.9026 15:00 US wholesale inventories
Investec currency forecasts as at 27 July 2017 Key levels
  Q3 '17 Q4 '17 Q1 '18 Q2 '18 Support Resistance
GBP/USD
1.29 1.30 1.30 1.31 1.2920 1.3260
GBP/EUR 1.13 1.14 1.13 1.13 1.1094 1.1200
market brief daily chart
Market overview

There was a little more action yesterday evening in financial markets with President Trump warning that North Korea will face a devastating military strike if it continues to threaten the US. As per Bloomberg, he said the country would be "met with fire and fury and, frankly, power the likes of which the world has never seen before" if it continues to threaten the US. The VIX (a measure of expected S&P 500 stock index volatility) spiked from 9.54 just after Europe went home to around 10 when the comments were reported to a peak of 11.29 with 30mins left in the session before closing at 10.96. Currencies were little changed, the US dollar index gained 0.2%, while EURUSD fell 0.4% and the GBPUSD dipped 0.3%.

Staying with Trump, an earlier article by the Washington post suggested North Korea’s nuclear capabilities may be more advanced than prior expectations. According to US intelligence reports the state: i) can now produce small nuclear warheads that fit inside its missiles, ii) is outpacing expectations in building missiles that are capable of striking the US mainland, and that iii) the state may have up to 60 nuclear warheads, this compares to ~7,000 each in US / Russia, 260 in China and 215 in the UK.

A motion of no-confidence in South Africa’s President Zuma was defeated by 198 votes to 177. Even though the ballot was held in secret, the opposition was not able to persuade enough members of Zuma's ruling African National Congress to side with them.


The day ahead

Looking at the day ahead, it is another quiet day in markets. We have the US preliminary Q2 non-farm productivity, unit labour cost data and final June wholesale inventories as well as the MBA mortgage applications.

Thought of the day

For the millennials it is '#WednesdayWisdom' on social media. Here on the Investec dealing team we thought we’d share with you some wisdom about our famous Zebra. Did you know there are three species of Zebra? The first is known as the Plains Zebra which has several subspecies. The second is the Mountain Zebra and the third is called the Grev’s Zebra (also known as the Imperial Zebra). As surprised and perplexed as you may currently be hedging is not dissimilar. In FX there are many different ways to lock in a hedge on your currency exposure. Whether it is Open or Fixed Forwards, Vanilla Options or Participating forwards there are many different “species” of product in our wide suite of solutions. To learn about a potentially new set of stripes for your FX portfolio please call the Investec Dealing team on 0800 055 6339.

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