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As geopolitical tensions increase, oil and gold prices are rising before CPI

As geopolitical tensions increase, oil and gold prices are rising before CPI
As geopolitical tensions increase, oil and gold prices are rising before CPI

As geopolitical tensions increased ahead of the key U.S. inflation data.

The yen has been mostly flat against the US dollar. Its gains have been largely unwinded following rare interventions in the currency markets by Japan.

North Korea launched a missile early in the morning, which shook Asia. The markets remained 'focused' on the U.S. Consumer Price Index data in the afternoon session to see if it would signal a possible Federal Reserve rate increase.

Kyle Rodda is a senior financial analyst at Capital.com. He wrote that "market sentiment is lukewarm amid lingering geopolitical risks and as market players head to U.S. CPI statistics."

He added that the lack of substantive news and progress in the talks, coupled with Iran's reaffirmation of its commitment to control the Strait of Hormuz is keeping oil prices on the rise, while U.S. indexes are on hold.

U.S. crude climbed 0.89%, to $83.94 per barrel. Brent rose to $89.60 a barrel. Both were up 0.78% for the day. Both benchmarks closed more than $1 higher on Wednesday, their highest closing since July 31, and continuing gains after a 5% jump on Monday.

Spot gold rose 0.46%, to $4387.03 per ounce. MSCI's broadest MSCI index of Asia-Pacific shares outside Japan rose 0.5%. Japan's Nikkei stock gauge, the benchmark for Japan's market, traded flat after a long holiday.

The Yemeni transport ministry reported that four crew members of a ship owned by Egypt were killed during an attack on Tuesday. Meanwhile, the U.S. army said they had struck a container vessel attempting to sail towards an Iranian port. This would be the first Houthi strike on shipping since February 28, when the Iran War began.

The war is not ending, despite the repeated claims of U.S. president Donald Trump that a deal was imminent.

Pyongyang has long condemned the joint military drills between Seoul and Washington. A North Korean missile was fired days before. Taiwan has condemned the planned naval exercises between a Chinese warship and an Indonesian ship off its east coast.

Money markets indicate that there is a 50/50 chance of an increase in the CPI on Wednesday.

A poll predicts that consumer prices will rise 0.1% in July, after dropping 0.4% in June. The annual CPI inflation rate is expected to drop to 3.4%, down from 3.5% one month ago.

Skye Masters said in a podcast that "everyone is watching the CPI report." Skye Masters is head of'markets research' at National Australia Bank. If you see the CPI report coming in at zero I think that you will see a reasonable rise in Treasuries, as the market releases expectations of the Fed tightening.

The markets are also increasingly pricing in a rate hike early in Japan. This puts pressure on Japan's short-dated bonds. The yield of the 5-year Japanese government bond rose to a record-high 2.1%. Meanwhile, the yield for 2-year Japanese bonds reached a high of 1.63%, which is a new 31-year high.

The dollar index (which measures the greenback in relation to a basket of other currencies) rose by 0.04%?to 99.85. The euro fell 0.02% to $1.1538.

The Japanese yen fell 0.03% to 159.31 dollars, but remained?off the high of last week of 155.20. This is after several suspected rounds or intervention. The pound fell 0.01%, to $1.3501.

Early European trades saw the Euro Stoxx futures down 0.15%, at 6,563, German DAX Futures fall 0.12% to 26,444, while FTSE Futures dropped 0.25% and stood at 10,823.

The S&P 500 E-minis (U.S. Stock Futures) were up by 0.03% to 7,750. (Reporting and editing by Edwina Gubbs in Tokyo)

(source: Reuters)