: It was a thin holiday during the European session, as the ISM Services number in the US was the sole economic announcement. The session on Tuesday could be very volatile, not as a result of the announcement, but because of potential escalation in Iran.
- The ISM Services PMI was the only economic announcement on the calendar, with the world shifting focus to remarks by President Trump more than anything else. Tuesday will be a potentially dangerous market. The main takeaways are:
- The ISM Services number came in at 54.0, lower than the expected 54.8. The markets initially treated this as positive, as it could give the Fed hope that some inflation is easing, but with the war and energy-driven shocks likely to be an inflationary issue, it was a short-lived idea.
- The remarks by President Trump during the Tuesday reiterated his demands that oil flow freely through the Strait of Hormuz, or Iran will see its energy infrastructure destroyed. This had the effect of bringing fear back into the market at various times of the day in New York trading.
- Late Monday night, it was announced that the Pentagon was cancelling its 8AM press briefing, pushing volatility into the Asian markets, causing gold to jump roughly $40 in less than 5 minutes. However, the sellers returned, causing massive swings in what would have more likely than not been algo-driven moves.
- With the war seemingly not concluding soon, this will continue to be a story of escalation. Crude Oil will remain particularly vulnerable, with wild swings becoming the norm. The OVIX, the “VIX for crude oil” is hovering around the 96 level, at the top of the range it has been in for the last ten days or so.
- Commodity currencies continue to languish a bit, as concerns about the global supply chain continue to be an issue with markets. The Australian dollar, New Zealand dollar, and Canadian dollar all have been somewhat soft over the last couple of weeks, as are starting to lose value in early Asian trading.
- Many commodity markets are threatened with supply disruptions via the “knock-on effect” of the Straight of Hormuz being shut. For example, Copper markets will see a 40,000 tons shortage per month, and many fertilizers not being able to be sent through the area could cause supply concerns with grains such as Wheat. This could be the next area of volatility soon.