The markets started Thursday’s session once again very quietly with the major currency pairs moving very little throughout Asian and the first half of the European session before another tweet from President Donald Trump caused volatility to spike. After stoking fears yesterday that an attack on Syria was imminent, today he appeared to backtrack slightly.
U.S. futures are back in negative territory ahead of the open on Wednesday, as stocks continue to fluctuate against the backdrop of a potential trade war. Investors are also awaiting the release of the FOMC minutes from the March meeting.
A touch of risk aversion crept into financial markets on Wednesday, as the sense of relief over easing U.S.-China trade tensions was overshadowed by the rising geopolitical risk surrounding Syria. Asian stocks closed mostly mixed due to market caution, with European equities sinking lower as investors adopted a guarded approach. Although Wall Street ended higher on Tuesday as trade fears eased, geopolitical tensions could pressure U..S equity bulls this afternoon.
Traders and investors alike prepare for a gauntlet of news today. The only certainty in timing is CPI data due at 7:30 a.m. Central and the FOMC Minutes at 1:00 p.m. Central. A response from the White House to the chemical attack in Syria is imminent and Russia has said it will target the U.S. military if strikes hit Syria; there are reports that a second U.S. missile destroyer (one is already stationed) is heading to the Mediterranean Sea while Syrian leadership has reportedly fled the country.
Both yellow and black golds are currently finding support from heightened fear among investors that the United States and its allies may soon launch a military strike against Syria. This is in response to the suspected chemical weapons attack in the country. The fear is that there might be counterstrike by Russia, which could further damage Moscow’s relationship with the West.
Crude oil prices soared after we are seeing the reduced risk of a trade war but increasing risk of heating up the real war in Syria. After conciliatory remarks by Chinese President Xi Jinping promising to announce plans to open China's economy, including lowering tariffs for cars and enforcing the legal intellectual property and technology transfers of foreign firms in the country.
With geopolitical theatre (trade war posturing, central bank comments, FBI raids of Presidential lawyers, etc) grabbing all the headlines this week, it’s easy to forget that there is still some potentially market-moving economic data scheduled for release.