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Risk appetite returns as Korean fears subside

Euro sinks on Draghi's dovish stance

Stocks markets around the globe have continued to make gains following on from the gains made in US trading yesterday, as fears over the escalating tensions in the Korean Peninsula started to fade. North Korea had characterised the missile it fired over Japan yesterday as a “prelude to containing Guam,” home to an American naval base. Western leaders rallied to condemn the launch with Donald Trump declaring that “all options are on the table.”

US economic data will take centre stage later today. First up on the roster is the US ADP Employment change marked for release at 13:15. Expectations are for 185k new jobs to have been added. US GDP data is then set for release after at 13:30 with expectations that the US economy to have grown on an annualised basis by 2.7% above last month’s 2.6%. Despite the Dollar facing strong selling pressure yesterday it has managed to stage a modest recovery. Should the data disappoint expect the Dollar to continue to weaken.

Theresa May is set to begin her three-day visit to Japan today with security and trade set to dominate the discussions. The UK Prime Minister will look to reassure the world’s third largest economy that Britain will remain open for business after Brexit. Japan however, will be more focused on completing a trade deal provisionally agreed with the EU in July. UK Mortgage approvals is marked for release later today at 09:30 with 65.5k new Mortgage approvals expected.

Markets in Asia were broadly higher overnight, as geopolitical tensions have started to fade for now. Trump followed up with further comments in response to North Korea’s missile launch, which was one of its most aggressive actions in two decades, that “the world has received North Korea’s latest message loud and clear: this regime has signalled its contempt”. The Japanese Yen was steady at ¥109.71 against the US dollar after touching a four-month high in the previous session before slipping 0.4 per cent.

EUR/USD $1.1951 (-$0.0021)

EUR/USD is nursing a modest loss ahead of the European open having hit a session low of $1.1943 in recent trade. A flight to safety yesterday did push the pair to its best level since January 2015 after the North Korean missile launch but we saw this unwind late yesterday and overnight as other safe haven assets also pulled back. Looking ahead, German state CPI’s will be the focus for investors this morning while Spanish CPI and Euro Zone confidence indicators are also on tap. From a technical view, Monday’s low at $1.1943 and the August 11th high may offer support while on the upside we look for the overnight high at $1.1984 and yesterday’s high at $1.2069.

GBP/USD $1.2904 (-$0.0015)

GBP/USD is nursing a minor loss ahead of the European open, falling to a daily low of $1.2906 in recent trade. The pair did climb to a two-week high yesterday at $1.2978, boosted by broad losses in the Dollar after the North Korean missile launch. However, this move did begin to unwind late yesterday and continued to do so overnight. For the pound, UK PM May makes her way to Japan today for trade talks and investors will be on alert for any comments. Data wise, UK consumer credit and mortgage approvals are due at 09:30 BST.

USD/JPY ¥110.10 (+¥0.36)

USD/JPY is higher this morning, reaching a fresh two-week high of ¥110.16 in recent trade. Safe-haven demand for the Japanese Yen has abated as investors welcome a measures approach from US President Trump to the recent North Korean missile launch. The US Dollar has also rebounded from its recent sell off with US government bond yields also bouncing overnight. Data wise, Japanese retail sales surprised to the upside but promoted minimal reaction in the pair. From a technical view, we look for resistance at the August 17th high at ¥110.36 and August 16th high at ¥110.94. On the downside, today’s low at ¥109.51 and yesterday’s low at ¥108.25 are in focus.

GBP/EUR €1.0799 (+€0.0010)

GBP/EUR is flat ahead of the European open. The pair had been choppy in the prior session, falling to a multi-year low at €1.0743 before rebounding later in the session back above €1.08. Geopolitical tensions had been the main driver after recent concerns eased late yesterday and this continued overnight. Looking ahead, German CPI figures will be the focus for the Euro although Euro Zone confidence indicators are also on tap. For the pound, UK PM May makes her way to Japan today for trade talks and investors will be on alert for any comments. Data wise, UK consumer credit and mortgage approvals are due at 09:30 BST. From a technical view, yesterday’s low at €1.0743 may offer some support before the October 13th, 2009 low at €1.0619. On the upside, yesterday’s high at €1.0811 and Monday’s high at €1.0833 are in focus.

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