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Tensions between the USA, Russia, and China: markets remain complacent

With all the talk about North Korea in the media over the last few days, it's very strange that the markets remain complacent.

Usually, if there is a factor of risk, tensions between the USA, Russia, and China, or the like, we should see some type of flight to safe assets.
Well, Kim Jong Un has just demonstrated that he has the capability to send a missile as far as Alaska, and may have the ability to nuke Tokyo very shortly. Yet, the markets remain eerily calm.

Sure, the 4th of July could be partially responsible for muted volumes and activity but assets like Gold have had very little downtime and currencies like the Yen, and the US Dollar have been open throughout the holiday.
There was a light sell off at the end of the European session yesterday but stocks in Asia this morning seem oddly resilient.

This evening, or around lunchtime on Wall Street, the US Federal Reserve Bank will release the minutes from their meeting three weeks ago. The Fed, along with other central banks around the world, have been trying very hard lately to emphasize that the 2008 financial crisis is finally behind us and would love to get back to business as usual.

During their last meeting, they did manage to raise the interest rates by 0.25% to 1.25%, despite the economy not performing according to their expectations. They'll have another meeting this month on the 26th and markets are currently predicting a 0% chance that they'll raise the rates again.

For short term traders, an unexpected move by the fed could mean great gains, but for long term investors, it's more important to keep in mind the projections of where we'll be in a year or more.


Mati Greenspan - market analyst - eToro

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