Iran fired hundreds of ballistic missiles at Israel yesterday and the United States and Israel vowed to respond, fueling fears of a full-scale war in the Middle East.
➡️ Yesterday there was a major Iranian ballistic missile attack on Iran. The attack was detected well in advance and the US and UK assisted Israeli air defenses in intercepting the missiles, although it is clear that some managed to get through and hit Israel. However, there appear to have been no casualties and the damage was rather minimal. The US has pledged to assist Israel in taking military action against Iran, and Israel has also pledged to respond, but so far has not done so. Israel struck Hezbollah targets in Beirut last night as that front of the war continues. Iran's move helped strengthen the U.S. dollar as a commodity and sink risk assets such as stock markets, with most major indices, except China's HSI, closing sharply lower.
➡️ The US promise to assist Israel in a response surprises many analysts, as the US has recently sent a message of de-escalation regarding a regional war. Israeli media have reported that missiles have been stored in Dimona, which sources outside Israel say is a nuclear weapons production facility. The Iranians have also threatened to further strike Israel with missiles with “astonishing destructive capacity” that could be seen as a veiled nuclear threat. It could be that these factors have now put the US administration in a position where it is ready to strike Iran together with Israel, or at least assist Israel in doing so. It is clear to most analysts that Israel has the capacity to strike a severe blow to Iran, but it is far from clear that it could actually strike Iran’s nuclear weapons production facilities.
➡️ Crude oil rose yesterday in response to events in the Middle East, as Israeli action against Iran could impede oil production in the Middle East. The price seems to have stabilized in the last few hours.
➡️ In the Forex market, the New Zealand dollar was the strongest major currency since the Tokyo open today, while the Japanese yen was the weakest. However, the numbers are so low as to be likely irrelevant.
➡️ Yesterday, three high-impact data were released regarding the Forex market:
- Eurozone Consumer Price Index (CPI) Flash Estimate: Exactly as Expected.
- US ISM Manufacturing PMI: Slightly Lower Than Expected, But Not Significantly So.
- US Job Vacancies Shake Up: This reading was significantly higher than expected, suggesting that the US economy may be growing a bit too much for the Fed to cut rates by 0.50% at its next meeting.
➡️ ADP's forecast for nonfarm payrolls will be released today.
Credit by DailyForex.com
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