Stocks remain under pressure, Fed speakers support US dollar

The yesterday’s decision of the US President, Donald Trump, to impose sanctions on prominent Iranian politicians made US-Iran relationship even more tense. Iran responded saying that the move closed diplomatic path forever. To make things worse, the US President said today that any Iranian aggression against the US will meet with overwhelming response. Such remarks do not hint at a rapid end to the conflict and, in turn, risk-off mood on the stock markets prevailed.

Stock markets moved lower in Asia, Europe and the United States. The UK FTSE 100 was the exception as it managed to finish today’s session 0.08% higher. The US stocks were additionally pressured by Fed’s Bullard who said that a 50 basis point rate cut in July would be an overkill. The awaited Jerome Powell’s speech saw just a minor market reaction and the message was to a large extent similar to the latest FOMC statement.

What one may find interesting is that the situation on the FX market is not exactly what we see during “risk-off” days. Namely, the New Zealand dollar is the strongest G10 currency. Note that RBNZ is set to deliver a rate decision on Wednesday at 3:00 am BST. Apart from that, Japanese yen and the US dollar are among the leaders. The British pound is one of the weakest G10 currencies after second-tier domestic data showed retail spending slowing. Speaking of the United Kingdom, it was announced today that the name of the next Prime Minister will be made public on 23 July.

On the commodity market, moods were not as downbeat as on the equity markets. All industrial metals moved higher with tin being the sole exception. Turmoil in the Middle East keeps boosting oil prices and precious metals. Gold remains above the $1400 handle.

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