Safe-haven flows dominated during the U.S. session after Trump announced his decision to dump the Iran Deal. The franc grabbed most of the risk-off gains while commodity currencies lagged.
- Trump: U.S. will leave Iran nuclear deal agreement
- Trump: Any nation aiding Iran on nuclear deal will also receive sanctions
- Trump: “Ready, willing and able” to negotiate
- U.S. Treasury Secretary Mnuchin: Sanctions in place until there is a deal to stop the nuclear program
- Leaders from Germany, U.K., and France release joint statement on Trump decision
- U.S. NFIB Small Business Index up from 104.7 to 104.8 vs. 106.2 forecast
- U.S. JOLTS job openings at 6.55M vs. 6.02M forecast, 6.08M previous
- U.S. IBD/TIPP Economic Optimism Index up from 52.6 to 53.6 vs. 51.3 consensus
- Canadian housing starts slumped from 225K to 214K vs. 218K forecast
Iran Deal or no deal?
In his much-anticipated speech on the Iran nuclear deal agreement, Trump announced that the U.S. will be calling it quits, despite efforts by European leaders to persuade him otherwise.
Trump maintained that the deal was one-sided and should have never been made in the first place, adding that it isn’t enough to prevent Iran from building a nuclear bomb. He mentioned that there were documents from Israel proving that Iran continued to pursue the nuclear program, so the U.S. government will have a memorandum to reinstate sanctions.
According to Treasury Secretary Mnuchin, these sanctions are going into place immediately and will involve companies with existing businesses in Iran. He also mentioned that the Trump administration will still work on a new and comprehensive deal, with the Donald himself stating:
“Iran’s leaders will say they refuse to negotiate a new deal. That’s fine. I’d probably say same thing. But fact is, they will want to negotiate… I am ready, willing and able.”
Meanwhile, leaders of Germany, France, and the U.K. released a joint statement on Trump’s decision while reiterating their commitment to the Iran Deal, leading to concerns about global tensions.
Risk aversion returns
Commodities and higher-yielding assets were already in a weak spot in the earlier session, and the risk-off flows accelerated during the New York hours.
- Gold is up $1.05 to $1,315.00 per troy ounce
- WTI crude oil retreated $1.02 to $69.72 per barrel
Although the prospect of the U.S. walking away from the Iran Deal initially propped crude oil higher, analysts suspect that a “buy the rumor, sell the news” scenario came into play and led to profit-taking off these speculations.
Major Market Mover(s):
The Swiss franc held on to its gains from earlier in the day and went for more as Trump’s announcement drove a flight to safety.
GBP/CHF slipped to a low of 1.3522, AUD/CHF is down to .7458, CHF/JPY slumped to 109.12, CAD/CHF dropped to a low of .7522, and EUR/CHF tumbled to a low of 1.1873.
The comdoll gang took most of the hits from the risk-off flows, with the Loonie getting an additional drag from the dip in crude oil.
AUD/USD slipped to a low of .7433, NZD/USD tumbled to .6955, USD/CAD popped up to a high of 1.2998, EUR/AUD rallied back to the 1.5950 area, EUR/NZD is up to 1.7038, and GBP/CAD rose to 1.7556.
Watch Out For:
- 12:30 am GMT: Japanese average cash earnings y/y (1.1% expected, 1.0% previous)
- Tentative: Australia Westpac consumer sentiment index (-0.6% previous)
- 5:00 am GMT: Japanese leading indicators