Fundawrap: US heads to N.Korea, Trump pulls US out of Iran 'nuclear deal'
- Fundamentals today were geopolitical the main, with a dash of Fed hawkishness from Chairman Powell.
- Oil was the pulling the most attention in the markets though, as traders braced themselves for Trump's decision as to what to do about Iran's continuous interest to develop a nuclear armoury.
The “sunset clauses” in the deal will let Iran resume some uranium enrichment after 2025, setting the stage for a nuclear weapons program. "In seven years, that deal will have expired, and Iran will be free to make nuclear weapons," Trump said prior to today's executive order to pull the US out of the Joint Comprehensive Plan of Action and reimposing tough sanctions once again.
This move by Trump, however, shows the fragility of global nonproliferation efforts and is clearly upsetting trade ties with the US's allies in Europe such as the UK, France and Germany. The UK, France and Germany have issued a joint statement assailing President Donald Trump's decision to withdraw the US from the nuclear deal with Iran. The leaders of those nations said the decision to pull out of the Iran nuclear deal was a matter of “regret and concern”, while they remained committed to the accord. However, unlike Europe, the US is not dependent on Iran for goods.
Meanwhile, the price of oil was a rollercoaster leading into and during the announcements with various contradictory headline between CCN and the NY Times, the later citing that Trump had told MAcron that the US was pulling out while CNN eluded to the US only wishing to make amendments to the agreement by proposing possible sanctions. WTI was dropping from the 70 handle on such a soft approach from Trump until it was announced by Trump that he was indeed pulling the US out of the accord and will be imposing “powerful” economic sanctions on Tehran. The price of oil rallied again back to $70-bbls but the news wasn't enough to turn oil prices positive on Tuesday - Iranian production will still flow to the rest of the world and thus will not be significantly impacted with the US pulling out of the accord.
Amongst all of the headlines to do with Iran, N.Korea got some spot in the limelight again as well. Trump told us during his announcements that Pompeo was en-route to North Korea to prepare for the upcoming summit. Trum and Xi have been working closely on their plans for sanctions on N.Korea and this will
Dollar stays firm on 93 handle
Meanwhile, the greenback was able to find higher grounds yet again into the 93 handle, reaching a high of 93.29, although it was unable to sustain the bid and drifted lower on the handle. Fed chief Powell was warning that markets may not be positioned for higher rates even though hikes were fully anticipated. The reflation trade continued to unwind as the dollar just becomes too expensive to finance which lead to a hammering of the higher betas.
Key headlines:
- U.S. Ambassador to Germany says on twitter german companies doing business in Iran should wind down operations immediately
- Nearly 2 in 3 Americans expect Iran to begin developing nuclear weapons if u.S. Pulls out of the deal -Reuters/Ipsos poll
- France's macron says: we will work collectively on a broader framework, covering nuclear activity, the post-2025 period, ballistic activity, and stability in the middle-east, notably Syria, Yemen, and Iraq
- Trump warns any nation that aids Iran on nuclear weapons to face sanctions
- U.S. Treasury sec Mnuchin: at the end of the 90-day and 180-day wind-down periods, the applicable sanctions will come back into full effect
- Iranian lawmakers say parliament will oblige the government to react "Fiercely" if Iran's rights ignored by U.S. - tv
- In a letter to Iran's supreme leader, lawmakers say will not let u.S. Impose its "Illegitimate demands" on Tehran - tv
- Trump, China’s Xi agreed on sanctions on N. Korea must continue
- China's president Xi says in a call with U.S. President Trump, China/3q U.S. teams can continue communication, strive to find a way to properly resolve trade disputes - China state media
- China's president Xi says China highly values the relationship with u.S., good working relationship with u.S. President trump -China state media
- Trump, in a call with China's Xi, affirmed his commitment to ensuring trade and investment relationship with China is "Balanced and benefits American businesses and workers"
- U.S. Treasury sec Mnuchin: at the end of the 90-day and 180-day wind-down periods, the applicable sanctions will come back into full effect
- UK government's plans to leave the EU's single market defeated in the upper house of parliament