The Impact Of Missile Attacks On Forex – A sense of calm prevailed heading into early Europe after markets witnessed a significant turnaround in the risk sentiment on restrained US response to Iran’s missile attacks on US airbases in Iraq.
Iran retaliated to the US killing of Quds Force leader Soleimani last Friday. Further, calls for de-escalation from both sides and US President Trump’s confirming of negligible damage/ casualties helped the risk recovery.
In a knee-jerk reaction to Iran’s retaliatory action in early Asia, oil rallied hard to 8.5 months highs above $65.50, USD/JPY hit three-month lows at 107.64 while gold prices topped $1600 mark amid risk-off at full steam.
The US dollar index gapped lower and reached lows at 96.82, as US 10-year Treasury yields dropped 10 bps alongside heavy selling in the Asian stocks and Wall Street futures. Meanwhile, the Canadian dollar picked up bids and knocked-off USD/CAD to 1.2978 lows on the oil price surge.
However, amid a likely thaw in the US-Iran geopolitical risks, in light of de-escalation hopes, a major relief was across the financial markets in Asia. USD/JPY recovered to 108.50, oil and gold prices pulled back from multi-month highs while Asian equities and S&P 500 futures clawed back losses.
The risk currencies, namely, the Antipodeans turned positive, with the Aussie headed back towards the 0.69 handle.
The European currencies, on the other hand, traded flat after a brief stint to the upside. EUR/USD tested highs near 1.1170 before caving back below 1.1150 while the cable faced rejection below 1.3150 but held above the 1.31 handle. Another safe-haven in the Swiss franc jumped to five-day highs 0.9665 vs. its American rival before reversing to around 0.97 handle.