Global Market Insights - Forex, Futures, Stocks

Safe havens gain, stocks slip as Iran attacks Israel

Broadcast on:: 02 Oct 2024
Audio Format:: other

Iran fires missiles at Israel in retaliation move. Dollar, yen and gold attract safe-haven flows. Oil rebounds on supply concerns. Wall Street pulls back ahead of key US data.

Risk Warning: Our services involve a significant risk and can result in the loss of your invested capital. *T&Cs apply.

Please consider our Risk Disclosure: https://www.xm.com/goto/risk/en

Risk warning is correct at the time of publication and may change. Please check our Risk Disclosure for an up to date risk warning

Receive your daily market and forex news analysis directly from experienced forex and market news analysts! Tune in here to stay updated on a daily basis: https://www.xm.com/weekly-forex-review-and-outlook

In-depth forex news analysis on all major currencies, such as EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD.

Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. This is the Daily Common for Wednesday, October 2nd by Haralambos Pizura. I'm Cristina Maru Causean. Thank you for joining us at XM.com. After Powell's boost on Monday, the dollar extended its gains against most of its peers on Tuesday, with the only currency resisting the dollar's strength being the Japanese yen. Having said that, though, the catalyst wasn't receding bets about a back-to-back double rate cut by the Fed, but Iran's missile attacks on Israel in retaliation for Israel's operations against Tehran's Hezbollah allies in Lebanon. The dollar turned into a safe haven, benefiting from risk aversion, and this is evident by the fact that Treasury yields, which usually move and tandem with the dollar, pulled back. What is also supporting the case of haven flows into the dollar is that yesterday's US data were not that encouraging. The ISM PMI held steady into contractionary territory in September, with both the prices and employment sub-in disease further declining, allowing investors to continue assigning a decent 40 percent probability of a back-to-back 50 basis points rate cut by the Fed at the November gathering. The next tests for investors' rate cut bets may be the ISM non-manufacturing PMI on Thursday and Friday's non-farm payrolls. Nonetheless, with Israel and the US pledging to retaliate against Iran, fears of a larger conflict may keep the greenback and other safe havens like the yen supported for now. The safe haven of choice during the Middle East saga seems to have been gold, with the precious metal rebounding more than 1 percent yesterday, notwithstanding the dollar gains. If market participants remain concerned about a bigger war, gold is likely to continue marching north and conquer new, uncharted territory. Even if geopolitical tensions ease at some point, the yellow metal may be destined to extend its rally as most major central banks around the world are expected to continue lowering interest rates. Yesterday's attacks had the biggest impact on oil, with WTI crude prices rebounding more than 8 percent from yesterday's lows on worries that further escalation in the Middle East could disrupt output from the region. Lately, oil markets were mostly concerned about the weakening global economic outlook, but the latest geopolitical developments in China's willingness to revive economic activity may allow the rebound to continue for a while longer. All three of Wall Street's main indices felt the heat of the missile attack with a nest act losing the most ground, however the broader uptrends are not threatened yet. Even if the retreat continues for a while longer, investors may be tempted to buy again on new evidence that the US economy remains in good shape. With the Fed placing extra emphasis on the labor market lately, a decent jobs report on Friday may revive appetite, even if the data translates into less aggressive rate reductions moving forward. Elsewhere, the euro tumbled after euro zone inflation dropped below 2 percent for the first time since 2021, and after European Central Bank president Lagarde said before Parliament that the latest developments strengthened their confidence about inflation returning to their target soon, and that this should be reflected in the upcoming policy decision. This prompted traders to fully price in 25 basis points worth of rate cuts at each of the October and December gatherings. [BLANK_AUDIO]