Middle East risk retreats, shifting spotlight from geopolitics to finance!? "Key points and event schedule for January 9"
Yesterday, from early morning, the Iranian Revolutionary Guards attacked a U.S. military base, causing the cross yen to fall sharply.
Afterward, with reports that attacks from Iran had stopped and that a letter delivering to the United States stating “If the U.S. does not attack, Iran's attacks will also end” had been conveyed, the risk-off positions were unwound, and the losses were fully reversed.
The West leaned risk-on, and once President Trump indicated in a press conference that there would be no military option, risk-on accelerated, leading to the full unwind of risk-averse positions held since the beginning of the year.
It was a day with a wide swing from risk-off to risk-on.
If Iraq and the undisciplined Iranian militias remain subdued, the Middle East risk may be temporarily over.
◎ Today’s Points of Attention
1) Retreat of Middle East risk
President Trump stated in a press conference that military options are not ruled out, but he would not use them.
The condition (red line) seems to be no U.S. deaths, so the key point will be whether Iran can effectively control militias and maintain domestic grip.
The United States says it will continue to impose economic sanctions even without a military option.
If further sanctions are imposed on Iran, even a limited additional burden could provoke anti-American sentiment from somewhere in Iran that could lead to attacks on the United States.
We should watch closely to avoid a situation where military options become necessary again.
2) Statements by prominent figures
Today, statements from Federal Reserve Vice Chair Lael Brainard and New York Fed President are scheduled.
With risk-off fading, attention is shifting from geopolitics to economy and finance.
Pay attention to the statements by influential figures, especially on the impact of geopolitical risks and the weaker recent ISM Manufacturing PMI results.
3) British Parliament
In the British Parliament, which resumed on Tuesday, discussions and votes on Brexit-related bills continue.
This week ends today; after debate in the House of Commons, a vote will be taken and the results sent to the House of Lords next week.
Depending on the content of the debate and the voting results, the pound could move significantly, so caution is advised.
◎ Today’s Economic Calendar
Thursday, January 9
House of Commons, Brexit-related bill discussions begin (through the 9th)
10:30 CNY China CPI (Consumer Price Index)
19:00 EUR Euro-area unemployment rate
21:00 MXN Mexico CPI (Consumer Price Index)
22:00 USDLael Brainard, Vice Chair, Federal Reserve, speaks
22:30 CAD Canada building permits
Friday, January 10
01:30 USDWilliams, President of the New York Fed, speaks
03:20 USD Evans, President of the Chicago Fed, speaks
04:00 USD Bullard, President of the St. Louis Fed, speaks
04:00 CADPoloz, Governor of the Bank of Canada, speaks
