Unrested in anticipation of ‘Trump Foot’

1) Unrested in anticipation of ‘Trump Foot’
Last night, the dollar-won (REGN) exchange rate closed at the level of 1,511 won, up about 17 won from the previous day due to the strong dollar. In the U.S. bond market, long position liquidation of 5-year and 10-year bonds is observed. Capital Economics argues that although there is widespread perception that “Trump will eventually retreat from the war if the market resistance grows further,” and that the market is looking forward to the possibility of inducing a policy review by the midterm elections, a Trump put can only come out if the market situation is much worse than now

2) Concerns over U.S. bond seizures
Citigroup’s Jim McCormick noted that bond traders are paying attention to the 5.5% level. The last time the 30-year U.S. bond interest rate reached 5.5% was about 22 years ago. “Investors’ calculations for low-priced U.S. bonds have changed,” he said, noting that core inflation shows no signs of slowing down. He said the market is underestimating the risk of a Fed rate hike, adding that “if long-term U.S. interest rates continue to rise, a very unstable environment could be created for risky assets such as stocks and credits.”

3) Trump ‘may resume hitting Iran hard’
President Trump said, “I hope we don’t go to war, but if necessary, we may have to take another big hit on Iran.” President Trump’s remarks re-emphasized the possibility of resuming military conflict with Iran. However, even after the ceasefire agreement in early April, he has repeatedly warned of the resumption of military action and then withdrew it. He said the previous day that he had put on hold the air strike against Iran, which was scheduled for the 19th at the request of Middle Eastern countries

4) NATO reviews mission to protect ships in Strait of Hormuz
The North Atlantic Treaty Organization (NATO) has begun to consider supporting the passage of merchant ships if the Strait of Hormuz does not reopen until early July. “Political direction must be set first, and then official plans will be established,” said Alexus Greenkevich, NATO’s supreme commander of the European Union. “If you ask me if I’m thinking about the possibility, of course I am.”

5) 日 Finance Minister says ‘drastic yen defense measures if necessary’
It reaffirmed Japan’s position that it can intervene in the foreign exchange market if necessary to defend the yen. Finance Minister Satsuki Katayama said at a meeting of finance ministers of the G7 countries that he has gained understanding of Japan’s position and will take drastic measures if necessary. Bank of Japan governor says firms are shifting costs rather quickly and says he’s watching upward pressure on prices
(자료: Bloomberg News)