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Geopolitical risk increases with Syria a key factor this week

Geopolitical risk has ramped up several notches over the weekend after a coordinated bombing of supposed chemical weapons manufacture sites in Syria. The reaction of financial markets on Monday morning seems to be relatively contained, but this is a story that could continue to run and have an impact in the days and weeks to come. Trading on newsflow is never an easy prospect in the short -term but we consider the outlook for forex, equity indices and commodities this week.

Dollar and Syria map

After weeks of ramping up tensions with its trading partners, it may be of little surprise if the US administration is using this as simply a bargaining position after all. All suggestions are that an agreement over a renegotiation of NAFTA is close, whilst Trump appears to be far more conciliatory over the potential tariffs with China and now even the prospect of returning to the table over the Trans Pacific Partnership. Trade disputes have been a source of negativity for market sentiment, but this seems to be changing now. Markets will remain cautious over how the geopolitical position in Syria develops, with the threat of conflict with Russia still bubbling on the backburner, however, for now this issue seems to be less of a concern for traders. Making knee-jerk trading decisions on newsflow makes for elevated volatility but also difficult trading environment, at least on a near term basis. Somehow looking past the noise and the longer term trends should ultimately re-assert. Subsequently, the dollar remains under pressure and rallies remain a chance to sell. Equity markets which had been looking expensive earlier in the year now look much better value, especially in Europe. This could be exacerbated by the ECB which may have see slippage in its move towards drawing the Asset Purchase Program to a close in the coming months (due to sluggish inflation). In further hampering the euro, this could drive strength into export heavy indices such as the DAX.




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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.