US Imposes New Iran Sanctions As Gold Hits 6-Year High

Hi guys and good morning, 25th of June, just gone 8 o'clock here in London. Starting off with a quick quiz: who are these fine young chaps on my right-hand side? We'll have a quick look over the markets before coming back from, from yesterday. Uh, pretty quiet really on the trading front. We had German IFO out in the morning, which was pretty much a non-event. If I just bring in the euro into picture, you can see what usually can move markets a touch just help drift us higher, uh, to eventually, you know, overnight getting closer to that 115 handle, which I'll talk about here in a moment, being relatively key. But the euro in a tight range has drifted on, uh, this morning despite coming down a touch, the pivot holding firm in a day where a weaker dollar just continued, and that has helped, along with other headlines which we'll come on to, has helped gold push to a fresh 6-year high. And that is the, the clue that you're getting for that picture right there. Also, oil helped a bit by the, the weaker dollar into the back end of the session, despite drifting lower around the, the, the open. Equities tight range, however, overnight with the new Iran sanctions, uh, has just drifted lower a bit. Whether that's enough to keep us pushing down or not, we'll come on to. Um, not necessarily, uh, new news that the US have been putting, uh, sanctions on, uh, Iran, but enough just to, to drift us down. And, and with a couple of events later today which could shape equity markets in general, I'll just be, uh, on our toes, especially going into the G20. At the end of the week where Trump and Xi are expected, expected to meet. So yeah, back to the, the picture, and congratulations Andy. Uh, not UV40 but Spandau Ballet, presumably because of their hit Gold. Exactly, Gold at a— no, I'm not singing it. Uh, Gold at a fresh, uh, 6-year high. Obviously it's come up a tiny bit, uh, overnight. Really strong move, uh, for, for the precious metal, helped by a number of things. It has to be said, with the Iran sanctions, uh, late yesterday and overnight, we of course helped to push higher. But as I mentioned, the dollar weakness, um, really from the Fed last week, and, um, that, that has helped us push, push higher. Whether we have a bit more room to go, we'll come on to Um, but yeah, decent push here for, for gold. And I know certain people, uh, certainly Amplify will be happy to, to hear that. I know Tommaso was in along and, and Will was, was in for a while. Uh, but let's have a quick look over that chart here. Certainly, uh, been a bit of a journey. It wasn't too long ago, certainly, uh, last— and this is a weekly chart here— certainly last summer where people were saying, well, gold has had it now. Gold has had it, and it was— you can see here down the 13th of August, really pushing low. You can see the, the trend line that had broken from the 2016 and 2017 lows as well. Break of that, however, we did then push higher, helped by the weakness of the dollar last year, the dovishness of the, the Fed, and the geopolitical tensions also helping us push on here. And finally finally breaking above the double top from February and then June 2016 level as well. The highest since May 2013 overnight. We're now trading on August 2013 levels on the futures. You can see just a few more dollars above and we'll be at that key level. Where do we go? Can we continue to push higher? I think there's gonna be a number of factors determining that. If we have a look at the, well, the calendar for today, just to identify possible moments where the dollar or otherwise may, uh, may move— certainly not in the morning. Then you've got Richard Richmond Fed at 3. I wouldn't be looking at that for, for gold, to be honest. So with, with Trump, any tweets on the Fed— another attack on the Fed yesterday. Helping to weak the dollar. We'll come on to his tweets in a moment. But what is quite interesting here is looking at the speakers today. You've got quite a few from the Fed. You've got, um, looking here, 1:45, you've got Fed's Williams, you've got then Bostic, obviously Powell, which will be for me the second most important one before we go on to Barkin, and then Bullard, the, the lone dissenter from last Wednesday's meeting. Speaking overnight, 11:30 scheduled here. Um, now those two there, Bullard and Powell, I think could absolutely give us an opportunity to see where this market goes, not just the gold but the dollar in general. We have had some weakness certainly over the last few trading sessions, and whether that continues or not, we may get a bit more of an indication here. Powell, who I mentioned speaking at 6 o'clock is, uh, speaking at a council, uh, council, sorry, on, on foreign regulations. According to reports, he is expected to talk about big picture events like the broader challenges of the Fed. So any comments regarding that will be key. He'll move the markets if he comments on what it is that policymakers are looking to determine whether they're going to cut in July or not. So certainly if you're trading the US dollar come 6 o'clock, I would be— to be honest, unless it's, it's a new, uh, a relatively old trade, I would be looking to exit position certainly ahead of that. Bullard, who I do think could, uh, have, uh, more of a chance of moving things— he's, uh, speaking obviously later on and scheduled to speak at a roundtable dinner organized by MNI News. Without a specific topic, Bullard will be free to talk about whatever he wants and, and what, uh, data other members will be looking at when they make their interest rates decision. So that will be something to, to focus on, um, certainly as we go into, uh, the back end of the session. Other than that, the calendar is relatively quiet. So it could be in not just those two that I mentioned, but you've got speakers from, from ECB's, uh, Deguindos in— well, just coming out now. So if anything comes out of of significance. Uh, I'll let us know. He's just coming out here. Banks' profitability prospects could thus be dampened. Yeah, nothing, nothing of note really for, for the euro. Uh, just keeping an eye on that pivot as we are seeing a bit of a reversal. But then you've also got the, the multitude of Fed speakers and then ECB's Kerr, uh, just 15 minutes after Powell, uh, as well. The main headlines Overnight, certainly the one that will catch the attention is the new sanctions that have been placed on Iran. Previously, and we know this already, that the US has sanctioned more than 80% of Iran's economy according to State Pompeo, who was mentioning this yesterday, who is visiting Saudi Arabia and the UAE to rally a front against Iran. I mean, if we just— we'll come back to the headline here, but if we just have a quick look at, at the markets here, you've got stocks at all-time highs. Yes, we— I mean, you could argue from the high of today, 58, we've done 11 points to where we're trading. You know, cash open does that. It's not the biggest reaction that we've seen. T-notes higher in the morning, but you know, nothing, you you know, half of that move has already been done and we're actually, uh, pretty much flat for the day given, you know, a few ticks here or there. Gold, it has been pushing higher, and of course then you could then argue that it is a clear risk-off move, but you've got the weakness of the dollar as well. And what a recovery, by the way, at 6 to only put us $15 up for the day. So is this headline a game changer? For me, not quite yet. For me, not quite yet, but it will grab attention. And certainly looking at, you know, stocks and safe havens, the continuation strategy, if the highs or lows were to break, could be the way to look at it. I just wouldn't be aggressively selling stocks right now, you know, rather letting the market tell me what's, what's going to go on. Trump has coupled his a maximum pressure campaign of sanctions with invitations to sit down with Iranian leaders. So saying how they want to do a deal and they're willing to talk, but then going and placing the sanctions as well is quite ironic, I guess, from the US president. And Iran didn't take to this too kindly, saying, "You cannot start dialogue with someone who is threatening you, who is intimidating you." Certainly we've heard that in similar talk from, from China as well. And whether the, the G20 meeting goes ahead or not, this could help weigh on stocks into the back end of the week. This Iranian situation at the moment, I don't necessarily see escalating for now. Having a look at oil prices, well, it is down actually on the day and pretty much bang in the middle give or take a few cents of, of the week's range so far. I know, albeit from yesterday and, uh, the high and low, but pretty much in the middle. So maybe looking for, for longs if we can break the highs on oil, but for now it seems relatively calm and under control. At the United Nations on Monday, uh, this is when those comments from Iran were was saying yesterday about how you can't do talks with someone who is threatening you. But even before the new penalties were announced, the US has applied sanctions to almost 1,000 Iranian entities, including banks, individuals, ships, and aircraft. May— so a month ago, the Trump administration prohibited the purchase of Iranian iron, steel, steel, aluminum, and copper. This has been going on for a while, so it's just adding fuel to the fire. But, you know, if we have a look back at, uh, you know, the how we've got here, I wouldn't say stocks certainly are too bothered about this. And their bigger concern for the moment is upcoming G20 and then the comments from the Fed and whether we're going to get a continuation of this dollar weakness or not. And of course, with equities, uh, you know, rates looking like we're actually gonna have a cut. Tension spiked in the Gulf since May. We had the, the tanker, Gulf of Oman. Of course, that led to a brief rally in the price of oil. We did then recover that, and now we're, we're trading near $58, which for me is obviously a key level from where we talked about in the briefing yesterday. You know, just having a look at this longer term, why is $58 important? Well, Well, actually it just needs a little bit of a refresh here, the chart. Let me just remove everything off here on the chart. Having a look here at oil, you can see just those previous lows coming back from May this year before the push down in the last day of the month or the second last day. We're now back there. $58, massively important. Can we close above there this week, or is that going to be a short-term top? I put it down to, you know, the importance of technicals right now. $55 was key. You can see why from the high that we had on the 10th of June, the failure to make that, that new low on the 12th, and we pushed on. Next key level to the upside, certainly from just a support resistance point of view, $60. Also another psychological handle. So seems in the balance for now. and this story on Iran not enough just yet to help us push higher despite the fact that the dollar is weak, which of course would help, uh, oil price. Um, so yeah, one to keep an eye on but not necessarily one to ignite things, uh, straight away. Um, trade G20 coming up. The headline from, from Bloomberg overnight: Trump and Xi to seal a deal. Traders aren't holding their, their breath. Um, the general consensus of course is, uh, that there is going to be a meeting. Trump's tweet caught the market off guard last week. We had a decent push higher, helped by the, the dovish Fed. But you can see really from— if we have a look at the, the Monday last week where we were range-bound here, just draw an X because we've got the trend line on, you know, we have had a decent push from 2,900, which offered a a level of resistance in previous trade too. Monday, we're now 46 points higher to the high, uh, we were 69 points higher. So decent push, helped by the idea that there is going to at least be a meeting, but not necessarily that there's going to be a deal. With the, the dovishness of the Fed, talk of 2 hikes like Anthony Cheung was mentioning last week, Trump can set that step up his hawkish rhetoric. He's done it with Iran, he can now absolutely do it with China. You know, he was blacklisting more technology firms over the weekend, so he knows what he's doing. I still stand by the fact that I think he's just shot a bit too early here with the positive China news, obviously the election year perhaps behind his thinking. Chinese equities, if I can just bring those into picture here, you can see the recovery that they have had since the the idea that they're going to meet. The general consensus on Chinese equities, uh, according to some analysts, is that they won't actually come under too much pressure whatever happens at the talks, or if there is even talks. Uh, they said the, the downward price action wasn't too severe as the trade dispute escalated because institutional investors hadn't piled into emerging market rally in the first quarter. So while we would not advocate fully allocating back into high beta emerging market equities and risk-on, given the real risk to growth, the fundamental story. Nothing is screaming out to us to be fully defensive either. So other comments to bear in mind, and this article here does go through some of those here, um, let me just bring that into It's a picture. There was— yeah, I think that the uncertainty surrounding— here we go. I was going to say, I thought the, the article disappeared there for a moment, but, uh, here are a few snippets of what people are, uh, viewing ahead of the meeting. Nobody is really expecting anything concrete. There's very slim chance that we'll get a solution to the trade issue. The market has already discounted bad news for a worst-case scenario. Our position is to take a wait-and-see approach. We're waiting for things to get worse on a much larger scale before buying the dip. Uh, Brian Chen there. I think a lot of people are certainly looking at that over the coming years. But, you know, this, you know, sentiment leading up into this meeting is, you know, pretty, pretty bad that they're not actually going to get anything done. The fact that they're talking is what's pushed prices higher. So even if they weren't, uh, you know, no deal was struck. And no, I don't think the market is expecting that. Just the fact that they're talking, and Trump I'm sure will say they had constructive talks, well, stocks should remain pretty elevated. We did a quiz, a little survey after the briefing yesterday on what the traders here believe the bias for US stocks would be this week, and this was before the sanctions on Iran. And the majority, or the highest answer, was that stocks would actually come lower. You could argue that a bit of that is just down to the fact that we are at these all-time highs again. It is a case of taking profit, um, and regardless what happens in the G20, you know, we're not going to see a massive correction. If we were to see hawkish chat from the Fed— and let's go back to that calendar— Powell and Bullard may give, uh, you know, that opportunity, then sure, we could drift that lower in stocks. But it seems that, you know, the, the rate cuts are now, you know, being priced in. It might even be that we're getting a double cut in one at July, you know. That's just going to add to the fire to push this market higher with the, the dollar weakness. G20, uh, it seems as we're getting closer, what was thought to be such a big event is actually now being brushed to a side as not too much as expected. The opportunity for me will come on the flip side. So the— you've got to think of it as really the buying opportunity will come if they were to strike a deal. The chance of them doing that is low, so therefore the reaction will be high. And on the flip side, if the talks go really badly and, you know, China and the US, you know, do what they did back in, uh, the beginning of, of May and say they're not going to come to any arrangement anytime soon, and then stocks can come up. Anything in between— talks going well, progressing, we had a good chat— sideways movement, and then let the Fed dictate where this market will go. That would be my, my opinion on things going forward. Also overnight, headline-wise, Boris Johnson— we've got to talk about Brexit. Got to talk about the new PM, or supposedly the favorite for the new PM, Boris Johnson, saying he's serious about no-deal Brexit threat. So yesterday, seeking to regain momentum in the bid to become the next Prime Minister, he was saying that we need to take the country out of the European Union on October, even if a deal with the bloc had not been reached. We've heard this before, however, you know, in the build-up to certainly the conservative voting. He did lower his, his hawkish rhetoric a touch, uh, regarding no deal. So just stepping it up a touch, however not, uh, influencing the pound too much at the moment. The pound very much a case of maybe wait and see to the back end of July when we have our, our new PM in place. And more for now is getting dragged around by the US dollar. We'll have a look at the euro pound slightly as there was a couple of reports regarding that. But Boris Johnson, the former London Mayor, still the front-runner in the race to succeed May. His comments were, "My pledge is to come out of the EU at Halloween on the 31st of October, and the way to get our friends and partners to understand how serious we are is finally, I'm afraid, to abandon the defeatism and the negativity that has enfolded us in great cloud for so long and to prepare confidentially and seriously for a no-deal outcome. He said he did not want the no-deal outcome, but it was necessary, uh, to, to go and put with that and, and prepare for it going forward. All things that we've heard before. So with the headlines, if we have a, you know, a bit of a recap, you've got the, well, gold pushing high, dollar weakness, uh, and potentially a bit of risk-off. You have to say that that's fair enough. The Fed situation, we've got speakers today, so being aware, uh, certainly, uh, of Powell at 6, Bullard this evening, they're going to be the main ones to focus on. I think Bullard will offer the best opportunity as it stands right now. The Iran situation, risk off in the market, oil not necessarily buying into it at the moment and is pretty much flat for the week. Very important area, uh, here you can see again 58 to keep an eye on where we close each day and week. The trade situation, G20, as we drift down towards it, not too much in the way of progress expected to be made. You had the, the two opportunities of a deal being reached or a deal not going to be reached for a very long time. That's your opportunity for, for a trade there. And then you've got Boris overnight stepping up the hawkish rhetoric. Nothing necessarily new, but just a repeat of something that he hasn't said for a while. Quick look at the calendar just to wrap things up before we have a look at some of these markets. Uh, you can see going through in the morning, it's likely to be quiet like it was yesterday, uh, in the morning. Uh, patient trade, not looking to get too involved would be my advice. Even into the afternoon, the only two bits of notice of data-wise, the Richmond Fed, unlikely to move markets, and the API Well, it depends how out of line, uh, those inventories are. It's going to be about the speakers. We've had, uh, De Guindos, not much in the way of movement from that. Again, quiet until we come into the afternoon and Fed speak and a bit of ECB from Coeur as well. So that's going to be certainly from a schedule point of view, uh, the driver, uh, as well. Having a look at markets, the, the pound here, we had a look at oil. You can see the, the pound certainly here against the euro perhaps looks like it is going to be topping out a touch, almost reading— reaching, uh, north— where it did reach, uh, 0.90, which is again a key level from a breakdown that we had back in January last year. It's been a strong push higher. It just looks like the, uh, from where— yeah, literally as we then hit the low from the year on the 5th of the 3rd, and overnight over the weekend, the 6th of May, It's been one-way traffic to the upside. The last article I do want to just go over here is the pound looks even worse than the euro. You've got some analysts saying that it's likely to, you know, go towards 92 pence per euro by year end, about 3% below current levels. And this is not great for those that are looking to go on their summer holidays. Um, if you look back from where we were in May, uh, percentage-wise— well, I don't want to look at this as I'm off to Madrid shortly. Yeah, 5%, not looking, uh, too good for the pound. However, I think ahead of, um, the 23rd, 24th, 22nd, that sort of time where we're looking like we're going to have the, the new PM, that's when it's certainly scheduled for anyway. Not much can really be made in the way of progress, so I think we can drift higher. What happens from then on might be the opportunity to, to get short Euro pound, or long the pound in that case. From a gauge of sentiment, certainly I find this very useful with the dollar pairs, and just drawing up these trend lines here. If we were to get below this trend line, for example, okay, well, the market might be telling me we're now looking to come lower. But for now, certainly this market is favoring the upside. Key resistance, so be keeping an eye on that. Hopefully we do not get another 3% move in this market higher as we go through the summer. Stocks certainly from the, the EU open just recovering a touch, and the, the DAX only now 4 points below where it opened, uh, recovering some of that loss. Gold looking like it wants to have another go pushing that high. Euro held well on the pivot, and the pound pushing higher for more a technical reason, uh, has remained higher above what was its previous high of the day at 128. Hope you all have a good trading day. Any questions, as usual, please, uh, do let me know, um, and I'll catch you in the chat if not.