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From the Floor: Trump's UN speech 'the key risk event' — #SaxoStrats

   • Trump to speak before United Nations at 1430 GMT
   • BoE, BoC comments inhibit GBP, CAD rallies
   • Portuguese debt upgraded to Investment Grade status
   • ZEW survey at 0900 GMT expected to show sentiment boost
   • Silver breaks uptrend from July, hits $17.05/oz target

By Michael McKenna

"The key risk event for today," says Saxo Bank head of FX strategy John J Hardy, "is US president Donald Trump's speech before the United Nations Security Council."

The address is Trump's first appearance before the UN, and it marks a major opportunity for clarification of US foreign policy regarding North Korea and Iran. Markets will watch the former most acutely, both to gauge the risk of imminent conflict over Pyongyang's continued nuclear weapons tests and to see the degree to which Trump proves willing to draw China, and US policy on China, into the tense nuclear standoff.

Markets have increasingly been ignoring the North Korean issue, with the isolated nation's most recent missile test putting almost no dent in risk-on sentiment, but pitched rhetoric from Trump could quickly change the perceived risk landscape.

In FX markets, Hardy continues, the Bank of Canada's comment Monday that it is watching the price of its currency closely put some pressure on the runaway loonie rally while similar cautions expressed by the Bank of England's Carney and Lane inhibited sterling somewhat.

"I still like cable higher," says Hardy, "if it proves able to hold the 1.35 level." (Read also Hardy's latest FX Update here on TradingFloor.)


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Source: Saxo Bank 

With the risk-on climate still very much in effect, Saxo Bank head of equity strategy Peter Garnry says that he sees a continued Nikkei rally as likely; the Japanese index gained 1.96% to 20,299.38 today.

In Europe, Garnry says that Dax futures are meeting a singificant degree of resistance, with the 12,500 level as key support and 12,575 as the upside area to watch. In Saxo technical analyst Kim Cramer Larsson's view, the Dax chart shows a bullish RSI reading with major resistance at 12,600.

Elsewhere in the charts, Larsson reports that Apple shares are weighing on the US Nasdaq index with a move above 165 needed to "demolish the bear picture".

In commodities, Saxo's Ole Hansen has his eye on the precious metals complex, with silver having broken its uptrend from July and meeting his target of $17.05/oz, while platinum currently trades at a historically unprecedented $350 discount to gold.

EURUSD is nearing the 1.20 area after Portuguese debt was upgraded to investment grade status, with yields falling 35 basis points as a result, while Garnry points to the 7% rally in Nintendo shares as reflective of the broader trend towards potentially inflated asset prices.

"Nintendo's valuation is four times higher than it was at the height of the dot-com bubble, with EV/EBITDA at 82," Garnry reports.

For more on Nintendo, Apple, central banks, and the major equities index, listen to today's Morning Call in its entirety above.

United Nations
Trump's UN address is expected to clarify the US stance on North Korea. Photo: Shutterstock 

Michael McKenna is senior editor at Saxo Bank


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