USD flows: Strains still on show
Familiar story overnight with skirmishes that add to the sense of fragile talks
Oil and USD modestly up, but market retains its waiting brief unless talks break down
Déjà vu all over again. It remains a case of unclear number of steps forward, unclear number of steps back on Iran after the fresh flare ups in Iran, with US strikes on military sites followed by Iran targeting a US airbase and Kuwait reporting drones and missiles. Whether this is just more jockeying and PR positioning as talks continue or not, it highlights again the fragile nature of the situation and the potential for any truce to run into incidents and accidents, before or after.
Oil thus somewhat back up (Brent +3%) though only well within yesterday’s bar and still generally around the lows for the month on the uneasy wait for better developments. Patience isn’t going to be open-ended but the market is giving the benefit of the doubt overall for talks to take the ‘several days’ suggested unless anyone says otherwise.
Dollar net modestly up with the news, around 0.2-3% across the board, and yesterday’s cross trades also further settling down, NOK/SEK settling down around the 1~ mark tested through and recovered yesterday, and AUD/NZD also not driving the action. Ironically, the volatile situation continues to leave volatility compressing further.