Risk-off made a return last night, with the shock attack of Malaysian Airlines flight 17. The flight – bound for Kuala Lumpur from Amsterdam – was downed by surface to air missiles at an altitude of 10,000 metres. The missiles were reportedly fired from pro-Russian rebel held territory in the Ukraine, however at this stage all reports are preliminary and nothing is confirmed. The shock has sparked strong demand for safe havens.
The Russian Ruble fell dramatically on the news of the terrorist attack, with USD/RUB rising 750 pips in the aftermath to settle at 35.20 – the Ruble’s lowest value since May. The fear and loathing in the markets was further exacerbated by Israel’s first ground invasion of the Gaza strip since 2009. The country sent troops and tanks in to Gaza to stop further missile attacks, after tit-for-tat escalation resulted in over 1000 missiles being fired in to Israeli territory and 200 Gaza residents killed.
Gold found demand after its recent dramatic sell-off – the metal rallied 250 pips, reversing the week’s earlier sell-off and reaching highs of 1324 overnight. Similarly, USD and JPY also found some strength, with the Yen acting as the slightly stronger safe haven with USD/JPY falling half a cent. With the lack of volatility recently, it has been easy to forget that surprise news events still occur – however last night’s news overpowered data releases and became the main focus for traders.
The remaining trading day is light on data, with only Canadian CPI and US University of Michigan Consumer Sentiment to be released. Given the overnight drama in global conflicts, there is a reasonable chance that politicians could spark some further action – the world will be looking to the US and other global powers to see what further actions can be taken to stem the rising conflicts