The US withdrawal from the Iran nuclear deal has little impact on global markets.
Scott Petruska, CFA |
May 09, 2018
The US dollar changed little overnight following Trump pulling us out of the Iran nuclear agreement. Although Asian equity markets fell slightly, EU equities showed small gains and the S&P is opening higher. Oil prices jumped past $70 a barrel. UST 10-year yields are trading at 3.00%, ahead of today’s $25 billion 10-year note auction.
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The dollar hit a fresh four-month high overnight, but then stalled, as oil prices pushed higher. Dollar buying throughout the European time zone was muted as traders begin to de-emphasize geopolitical risk. The dollar should remain bid as the 10-year yield tests the 3.00% ceiling.
The UK pound dropped briefly following poor UK retail sales data. Traders are sidelined as they await the BOE meeting tomorrow. No hike is expected, but BOE’s Mark Carney will be pressed for his assessment of a rate hike later this year. Hedge funds have pared their long UK pound positions.
After an early sell-off following the Iran deal announcement, the euro climbed higher through the trading day and sits now close to yesterday’s close. French industrial production and manufacturing data disappointed and helped fuel early weakness in the euro.
The Canadian dollar rebounded from a seven week low on Tuesday, supported by a fresh three-year high in crude oil prices. The US-Canada 2-year sovereign rate spread continues to widen, providing tailwinds for a stronger USD.
Asian equities weakened overnight as geopolitical pressures continue to fuel global investors selling Asian emerging market assets. The US dollar is approaching JPY110, the level that capped the dollar rally earlier in the month. Japan imports 100% of its oil, so the higher oil prices hurt Japan’s economy.
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|Source: Bloomberg 2017|
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About the Author
Scott Petruska is a senior advisor for Silicon Valley Banks’ global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.
Petruska has over 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.
Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.
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