Market Drivers June 21, 2019
Risk on after Trump pulls back on Iran strike
EZ PMI stabilizes
Nikkei -0.95% Dax 0.30%
UST 10Y 2.03%
Oil $57/bbl
Gold $1388/oz.($1400 taken out)

Europe and Asia:
EUR EZ Flash PMI 52.1 vs. 51.8

North America:

USD Flash PMI 8:30

After an initial burst of risk-off flows in Asia that took USDJPY all the way down to 107.05, FX sentiment improved after markets learned that President Trump called off a missile strike against Iran at the very last moment.

The tensions in the Gulf remained at a very high level after Iran knocked out a US drone claiming that it violated its airspace. President Trump noted that such a move was a mistake and the market was primed for a retaliatory strike but the last moment he pulled back communicating to Iran that the US would prefer negotiations. The Iranians for their part refused the overture for now, so tensions remain high, but the risk of conflict appears to have eased.

In Europe meanwhile, the flash PMI data came in better than expected with composite printing at 52.1 vs. 51.8 suggesting that business conditions in the region may have stabilized. German yields rose and so did the US 10Y trading at 2.04% ahead of the NY Open. Yesterday’s dip below the 2.00% level may have been a near term bottom in the global yield panic, especially if the economic data going forward begins to show even a modicum of improvement.

Today’s Flash Manufacturing PMI data out of US may offer further proof that the sector has stabilized and market sentiment could turn hopeful next week ahead of the G-20 meeting between Trump and Xi. The dollar is grossly oversold on a short term basis, especially against the yen and any relief on the news front could spur a short covering rally in both US yields and the currency next week.