“War, what is it good for?” Absolutely nothing, if you ask the musically minded. In financial markets, however, we tend to think of “safe havens,” and this week the dollar has reigned supreme in the currency market, with only the NOK outperforming due to the oil story. Global equities are on track for their first weekly loss in four weeks, amid concerns over escalating geopolitical tensions in the Middle East, while divergence in Asian markets continues. Overnight, the Hang Seng Index plunged as much as 4.5%, its biggest intraday drop in almost two years, while the Nikkei rose 1.92%.
West Texas Intermediate crude climbed 1.3% to $71.03 a barrel as investors await Israel's response to Iran's missile attack, with U.S. President Joe Biden urging Israel to refrain from attacking Iran's nuclear facilities. GBP/USD softened following comments from BoE Governor Bailey in The Guardian, where he mentioned the "chances of aggressive rate cuts." Bailey also highlighted that the Bank is "watching events in the Middle East closely," noted that "cost of living pressures are not as persistent," and mentioned that the "UK economy was more resilient than expected."
Elsewhere, Bitcoin gained 0.6% to $61,244.35, Ether rose 0.3% to $2,393.24, the yield on 10-year Treasuries advanced by one basis point to 3.79%, Japan’s 10-year yield remained steady at 0.815%, and spot gold dipped 0.1% to $2,655.84 per ounce. On the data front, we have a series of European PMI indices, followed by U.S. Initial Claims, ahead of tomorrow's eagerly anticipated Non-Farm Payroll (NFP) report, with consensus currently at 150k.
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