The USA conducted stronger strikes against Iranian defenses and naal facilities near the Strait of Hormuz overnight.
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- The US/Iran standoff is back in focus and dominating market action again, although its impacts are not as dramatic as they were towards the end of operation Epic Fury in March and April. President Trump now seems to understand he has been played by the Iranians within the deal negotiations, and he is now publicly taking the line that he will keep attacking Iran harder and harder until they finally get serious about a deal on terms Trump would regard as a "good" deal. So, the deal is still the focus, but Trump has lost patience and concluded more stick than carrot is needed to get what he wants. I believe this vindicates my recent statements here that the Iranian regime is not serious about making a deal and is just following a strategy to run out the clock on Trump until America gets tired and walks away. Unfortunately for the world and for financial markets, I believe the Iranian regime is prepared to sacrifice an enormous amount of blood and treasure for the objective of not giving President Trump what he wants, and this will likely lead eventually to a situation where the stock market is hit harder and crude oil gets boosted back to elevated prices above $100 per barrel. It may be that Trump's current focus on interdicting Iranian crude oil and on opening Hormuz reflect an awareness of that latter danger.
- Stocks are broadly lower on the re-escalation between the USA and Iran and an understanding that nightly warfare in the gulf could become a new normal. However, the drops are not overly large, but the price action is clearly bearish, although not strongly so.
- Interestingly, the fighting in the Gulf is not driving up the price of Crude Oil, probably because Trump yesterday announced that the USA has in recent weeks confiscated over 100 million barrels of crude oil from Iran. Whatever one thinks of it, it is a smart move from Trump's vantage as it could remove a key weapon from the hands of the Iranian regime: higher crude oil prices for the world.
- US CPI (inflation) data released yesterday came in almost exactly as expected, with the only deviation being a fractionally lower print on month-on-month core CPI. The US stock market got a small and temporary boost from the news. This data, along with static crude oil price action, may be preventing stock markets from falling more strongly.
- Precious metals are continuing to trade lower, with Gold reaching a new 6-month lor price and flirting with $4,000.
- In the Forex market, the USD/JPY currency pair made a new long-term high at its daily close yesterday, which will be a signal for many trend traders to go long. However, the volatility has become very low in recent days, and a new absolute high price has yet to be reached. The US Dollar Index remains subdued just below its 2-month high, and the rest of the Forex market has been quiet so far today.
- There are increasing signs that Bitcoin may have found a medium or even long-term bottom at around $60,000.
- The Bank of Canada left its interest rate unchanged yesterday as expected. The Loonie firmed slightly as the Bank expressed caution about inflation.
- The European Central Bank will hold a policy meeting today and is expected to cut its interest rate by 0.25%.
- There will be a release of US PPI data today.
- Tomorrow will see the IPO of SpaceX. There will be a lot of media fanfare, but watch how this IPO goes for clues as to whether the amazing recent tech rally is going to unravel soon.
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