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Trump tweet moves markets

Summary:

  • Tnote rises after Trump tweets on North Korean situation
  • US president to sell sell increased amount of military equipment to Japan and South Korea
  • US factory orders m/m fall to 31-month low

Donald Trump has shown an uncanny ability to move markets with just a single tweet during his relatively short term in power, and today a message relating to the rising geopolitical tension in North Korea has caused noticeable moves in the bond markets. The message read: "I am allowing Japan & South Korea to buy a substantially increased amount of highly sophisticated military equipment from the United States."

The US ten year bond spiked higher on the tweet and is now not far from the high seen last Friday after NFP disappointed. 

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 The Tnote popped higher as Trump tweeted on the North Korea situation. Source: xStation

 The Tnote price is the inverse of its yield and therefore exhibits a positive correlation with Gold and a negative one with the US dollar. The reaction to the tweet wasn’t quite as clear in these markets but there has been a move higher in Gold and some further weakness in the US dollar in recent trade.

With Gold recently hitting its highest level of the year, there has been a growing divergence with the Tnote which has lagged behind. A failure for US yields to support the move in Gold could be viewed as a warning sign that Gold has gone too far, too fast, and is due a comeback. however it could simply be a case of Gold leading the way and the Tnote could now be in store for more upside to close this divergence, with a move to around 128 bringing the two back into sync.

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 The Tnote has lagged Gold in the recent leg higher. Will the market soon catch up? Source: xStation

Also contributing to these moves may be the US factory orders release came in at its lowest level in month on month terms since February 2015 and even though there was a small upwards revision to the prior reading to +3.2% from +3.0% previously, the data point is negative for the US economy. 

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