If we see a continuation or escalation of hostilities, expect gold, oil, and the USD to push even higher

EM currencies are all already seeing a lift, with the South African Rand hitting 20-month highs against the USD.

We can now expect a relatively rapid reduction in interest rates for all major currencies and a period of increased volatility.

Any significant volatility will come from the ECB’s forward guidance, with big question marks over further cuts in October and December.

The odds of a 50-bps rate cut on September 18th have risen. Uncertainty is the market’s worst nightmare; whatever the decision is, we will see serious volatility.

Recent developments have forced the USD lower as a September rate cut looks certain, but will the cut be 25bps or 50? And will Powell’s speech shed any light?

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Today’s surprise data put paid to the dollar’s fall, with retail sales up 1% vs 0.3% expected – the biggest increase since January 2023.