Wake Up Call 2020
The nasty wake-up calls the no one wanted to start the year has roused the global stock market as investors had assumed smooth sailing hereafter the Phase One of the Trade Deal was announced. Now they're scrambling to seek out safe harbors in the wake of the Middle East strike. The biggest problem for equity markets is the current escalation undercuts the overall "blue sky" constructive sentiment equities market were gliding in.
Gold Surges Higher
Gold rocketed higher at the open from $1559.90 to a high of $1588.50 - levels not seen since 2013. There were some nasty gaps with standing offers getting steamrolled in 2- and 3-dollar increments. Expect more pain above $1590, but we've come a long way quickly and with $15-20 setbacks the new intraday norm, look for volatility to stay quite elevated.
Oil Price Spike
A possible Iran escalation and a 52-pronged US retaliation have spooked oil markets this morning. As a result, traders are tripping over one another to get topside to exposure. It's all about hedging the tail risk today. And a possible US-Iran war is a massive tail risk to hedge when it comes to oil.
Traders need to get long oil to defend against a potential oil price spike and just in case the tomahawks fly. So, it's likely a bit too early to fade this move as fears over just how far both sides are willing to escalate the situation will likely limit the extent to which these long oil hedges/positions unwind.
Currency: South Korean Won, Thai Baht
Asian Oil importer currencies are noticeably struggling today after the weekend browbeating escalations. But there is no denying the enormity of long-term geopolitical repercussions of the latest events, and even more so when considering the possible knock-on destabilizing consequences across the Middle East.
USD/KRW gapped up to 1168.1 on the open and has mostly been better bid at 1168-70, tracking general risk sentiment tone and equities performing poorly. Foreign investor flows have been net flat in Kospi so far.
More verbal intervention out of the Bank of Thailand's today suggesting the line in the sand for 2020 will be the USD/THB 30 level. According to Kanit Sangsubhan, one of seven members of the Monetary Policy Committee the BoT will take measure to tame the THB from appreciating beyond USDTHB 30.00