Tensions between North Korea and the US spark safe haven flows

Yesterday’s markets

11th August 2017

  • GBP - Manufacturing Production m/m: 0.0%
  • USD - PPI m/m: -0.1%
  • USD - Unemployment Claims: 244K

Tensions are running high as North Korea continues to threaten potential missile attacks on US soil with increasing imminence. Japan and South Korea have warned that if North Korea follows through with their threats there will be a “strong response” in retaliation by the U.S, hoping that this will calm tension and re-open a dialogue.

Trumps comments on the situation were that North Korea would be met with “fire and fury and frankly power, the likes of which this world has never seen before”, which shows Trumps fearless attitude to use Americas military power if necessary. Safe haven demand has increased as further developments from this story hits the wires.

Moving onto yesterday’s economic docket, where two pieces of high tier data were released. Firstly, UK Manufacturing Production exceeded market expectations, however was still unable to post a growth reading. Manufacturing Production registered 0.0%, bouncing back from last month’s -0.1%. Across the pond, the US released a key inflationary figure. US Producer Price Index fell into negative territory of -0.1%, possibly a sign that today’s pivotal CPI reading could also miss the economists’ consensus. 

Today’s markets

10th August 2017

  • AUD - RBA Gov Lowe Speaks
  • USD - CPI m/m
  • USD - Core CPI m/m

The focus of today will be on the US with the release of the CPI figure. It is expected to post 0.2%. However, for the last four months it has been missing the economists’ expectations. As the Dollar has been depreciating, import prices have been rising and a there is a tighter job market, the markets are hoping to see stronger price pressures this month. As the Fed are currently divided on whether low inflation is a short-term issue, a bullish reading today will provide them with further evidence, and perhaps a prompt, to raise interest rates again this year.  The day will finish with Fed members Robert Kaplan and Neel Kashkari speaking, giving them the chance to respond to the latest inflation data.