FX round-up: Risk-off trade grips markets after Trump comments

Geopolitical tensions mounted on Wednesday after comments from Donald Trump, directed at North Korea, sent shockwaves across global markets.

In the latest stand off between the US and N. Korea, Trump was quoted as saying “North Korea best not make any more threats to the United States,” adding “They will be met with the fire and the fury like the world has never seen. He has been very threatening beyond a normal state, and as I said they will be met with the fire and fury and frankly power, the likes of which this world has never seen before. Thank you.”

This came in responce to N. Korean threats of carrying out missile strikes on the US Pacific territory of Guam.

Brad Bechetel at Jefferies in New York said in a note, "Obviously we are looking at the increased tensions between the U.S. and North Korea," adding "Tensions are still high and not going away at the moment. Safe havens are bid and markets are a little uneasy."

As a result, safe haven currencies such as the yen and Swiss franc (CHF) saw some buying interest on Wednesday.

USD/CHF has been fairly bid since comments two weeks ago from governor Jordan of the Swiss National Bank (SNB) stated that the currency was overvalued and too strong.

The pair has rallied since late July from an area of 0.9444 to a high of 0.9772 on the 8 August.

Preliminary nonfarm productivity and labour cost figures were relased showing a reduction of 0.9% and 0.6% respectively. These negative figures weighed further on the pair taking it from a day high of 0.9663 to the day low of 0.9613 by 1300 BST.

A slight recovery was seen by the London close, with the pair trading at 0.9655, down 0.86% on the day.

USD/JPY went much the same way, as both the yen and CHF are seen as safe haven currencies to buy in times of geopolitical turmoil.

The pair is still on track to form a double top on the daily timeframe with support in the 109.34 area. Comments from Trump along with the negative US figures and rising doubt of a rate rise in the US all seem to be weighing on this pair. USD/JPY traded steady at 110.06 by 1700 BST, down 0.23% on the day.

Cable was relatively unchanged on the day, up marginally 0.01% by the London close, trading at 1.3004 with the euro suffering much the same fate, only managing a slight push lower, 0.12% to trade at 1.1742.