Safe Havens Rally on Threats From the Supreme Leader

The dollar held on to most of its gains overnight as most markets tracked sideways. All except the safe havens, Yen, Swiss and gold, on North Korean threats to bomb Guam, the US military base in the Pacific. Traders will be looking to headlines for any provocative comments from the supreme leader (either one!) or any moves to ease tensions.

The Kiwi has shown a bit of strength this morning on the back of RBNZ comments. The market was expecting a dovish tone after a couple months of weak data however, Wheeler somewhat surprised the market with a neutral tone, citing that he expects inflation to gradually rise to mid-target range. However, he tried to have his cake and eat it too, by commenting that he favours a lower NZD and that currency intervention is not off the cards after a 6% increase in the Kiwi this year.

Looking forward, we have UK Manufacturing Production out in the European session, which is expected to come in flat at 0%. Later in the US session we have US PPI m/m and Unemployment Claims, which traders will we looking to to confirm the Dollar reversal we have seen since NFP of Friday.

The big upcoming event of the week remains the US CPI data on Friday, which the market is looking to for a pleasant surprise as positive employment data translates into inflation. Figures have been stubbornly low in the last few reads and although unemployment rates and job creation figures have been very positive, we haven’t yet seen the job market resemble that of an auction, where employers have to bid wages higher to gain quality workers.

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