Yen climbs as tension mounts
The North Korean leadership yesterday promised further tests of its “delivery” capability despite failing to acknowledge the failure of its latest launch. In a move clearly designed to defy U.S. criticism, Pyongyang reiterated its right to become a nuclear power.
In a more tangible comment, “all-out war” was promised should the U.S. resort to any military action.
The JPY, everyone’s favourite currency at time of global tension, has reached a five-month high, trading close to major resistance at 108.80 against the JPY/USD.
Despite the world’s determination to see Kim Jong-un as a caricature of himself, not to be taken too seriously, the weekend’s display of military might will have sent shivers through the Korean peninsula and beyond.
Tough talk from President Trump and his deputy Steve Pence has failed to defuse the situation and has, if anything further inflamed Kim. It is clear that China has agreed to act as a buffer following an (undisclosed) agreement that the U.S. will back off from criticism of China’s monetary policy.
Amongst the warlike positioning, trade talks are taking place between the U.S. and Japan. Vice President Pence, recently in Seoul, has stated that the current free trade agreement with South Korea will be renegotiated. President Trump, having suffered a “bloody nose” at his first attempt at domestic policy reform has obviously decided to throw his weight behind trade talks. This is a continuation of his recent realization that campaigning and governing are two very different skills.
The French election takes place this weekend and the blackout period has begun. This is supposed to allow voters time for quiet contemplation of their voting intentions.
Marine Le Pen and Emmanuel Macron remain the frontrunners - both expected to advance to the run-off on May 7th.
Macron is, according to polls, the most likely victor. The latest voting surprise in Turkey, proves that black swans are still around. The powers given to President Erdogan, who can now stay in power until 2029 if he so desires amounts, according to the opposition, to a dictatorship. It seems Erdogan has decided that Turkey isn’t going to be allowed into the E.U. so he may as well look both east and south to exert influence.
A victory for Macron on May 7th will mean that France seeks a greater role in the E.U. Whether Germany allows its Gallic neighbours to exert more influence remains to be seen. A Le Pen victory means French withdrawal from the single currency and a Frexit vote. There is little chance that the E.U. can survive another high-profile departure and Germany will be under enormous pressure to “call it a day” as it will be expected to take on a huge amount of responsibility for the budget.
Sterling flies under Brexit radar.
I’m sure I wasn’t dreaming. We did trigger Article 50 a few weeks ago? Where are all the rows, all the horse trading? Not a single toy has been thrown out of the pram! Come on guys how can we comment when you won’t tell us anything...
Entente cordiale? Doubtful! Boring uninteresting bits? Quite likely. There is a massive amount to be discussed and it seems the negotiators are doing us all a favour by just getting on with it.
A timeline and a few milestones would be nice so we can track progress. It may be that for the next two years we will see a feast and famine scenario. The few outbursts from across the channel about a trade deal waiting until substantial agreement has been reached on the terms of the divorce are all we have seen of any conflict.
The pound certainly likes the hiatus, drifting in calm waters no headwind, no tailwind, just the doldrums of seeming harmony.
Just don’t get too comfortable.