Asia Summary and Highlights 3 Mar
US Central Command confirms strikes on Iranian missile and drone launch sites
Asia Session
Nothing explosive so far on Tuesday's Asia session. Major FX market is rangebound as market participants avoid being wrongfooted as geopolitics remain fluid. With JGB yields higher across the curve, USD/JPY is trading 0.05% lower at 157.27. The latest update from US Central Command confirms strikes on Iranian missile and drone launch sites but details are yet to be discussed.
Precious metal remain supported by ongoing geopolitical tension, so as oil. Major equity indexes are performing individually but mostly are seeing a turn lower after a late rebound on Monday. AUD/USD is trading 0.16% higher at 0.7105. NZD/USD is trading 0.02% lower while USD/CAD slips 0.09%. Else, EUR/USD is down 0.06% and GBP/USD is down 0.16%.
European and North American sessions
The USD was generally firmer, USD/JPY rising a big figure to 157.30 and EUR slipping below 1.17 from near 1.18. Despite the heightened political risk, EUR/CHF was firmer near .9120 from .9060 and EUR/GBP weaker at .8720 from .8770. Both GBP and AUD were relatively stable versus the USD. USD/CAD found sellers above 1.37 after advancing from near 1.3650. Equities recovered well from a weak start and UST yields were firmer with oil prices. While focus was on the Middle East a stronger than expected ISM manufacturing index of 52.4 from 52.6 with a surge in prices to 70.5 from 59.0 was consistent with the market movement.
The mood remains risk off, but this is being curtailed by the modest rise in oil prices. Though the USD remains firm, traders are looking beyond the initial knee jerk reaction. Most expect a short war of 1-2 weeks followed by a sizeable decline in oil prices, which could switch the risk off mood back to risk on. This is curtailing the scale of USD buying at the moment. However, this war is fluid, as Iran is trying to close the Straits of Hormuz and maximize the damage for Trump on the cost of living agenda. Reports suggest Iran is also using cheap weapons to reduce stockpiles of defensive weapons and keeping better missiles for later this week. Thus oil prices could still be volatile and some traders feel this could trigger a 2nd round of risk off trading that helps the USD.