We came into last week fearful of the retribution for the Iranian General’s assassination in Iraq. Thousands had taken to the streets in Iran calling on the leadership to act against the US as Trump continued to make aggressive claims of the strength of his arm and how he would crush any Iranian retaliation. 

So, whilst the fact retaliation came last week was no surprise, the nature and fallout from it has been. Iran chose to attack a US base in Iraq on Tuesday night, however, they elected to forewarn Iraq that the attack was coming which led to no casualties at the target itself.  

Obviously, as the news of the attack hit the news wires a sharp move to safe-haven currencies like Japanese Yen and Swiss Franc soared. Gold, which has had a very strong start to 2020 also soared to nearly 1600 as fears of a dramatic escalation of the situation looked valid.

The markets did what we often see and corrected back slightly from the extremes of the moves as all eyes shifted to Donald Trump's Twitter feed. The first tweet was centred around the fact that there were no casualties, and all was good. In a scheduled press conference later that day the forewarning started to emerge, and Trump himself had far more laid back approach than anyone would have anticipated with it seeming like the US and Iran were prepared to call this an eye for an eye, and relent from further escalation at this time.

The conciliary nature of the US and Iran brought the fear out of the markets and brought the stock markets back to highs and safe-haven assets back from highs.  One thing that is truly notable is the demand for stock and in particular US stocks as within days of a physical global attack, we were testing all-time highs, the resilient nature where value buyers look for any pullback as an opportunity to get started to show strength and depth to the bigger picture move higher.

With global tensions reduced, for now, the Iranian government remains under domestic pressure, this follows the downing of a commercial airliner which tied in with the assault on the US base, seemingly accidental killing over 170 innocent people with a high proportion of Iranians and Canadians on-board. Such a catastrophic error has the Iranian people calling for new leadership with the current administration already heavily unpopular prior to the recent escalation.

Events in Iran will be closely monitored this week, in theory, one of the biggest events will be the signing of the Phase One trade deal between the US and China, with both sides meeting in Washington on the 15^th. Whilst the markets seem to have this priced in, expecting all details within to be agreed by both sides with this event being more of a ceremony than negotiation, all eyes will be forward guidance on future phased negotiations.

We also heard late last week that the impeachment trial for the US President Trump will be set in motion next week with the House of Representatives transmitting the two articles of impeachment to the senate. Despite articles over the weekend suggesting Trump was starting to lose favour within his own party, it remains very unlikely that they would vote two thirds in favour of his impeachment with the markets seemingly unconcerned and unmoving on any story break around this topic.

Fridays Payroll data did bring a dip below expectation in the US Non-farm payroll denting the dollar slightly and taking stocks off highs. Earlier in the week, we had seen stronger PMI, so we look ahead to US Inflation data and Retail sales this week to see how the US is performing in these crucial areas.

In the UK it was a relatively quiet week for PM Johnson on Brexit, of course, his eyes would have been elsewhere earlier in the week with the heightening tensions in the middle east. The pound seems to be on a gradual decline at the moment as the reality of trade deal timescales concerns the markets. Johnson brings his Brexit deal to parliament later this week for approval, the success of which will naturally have a bearing on the markets.  UK GDP data comes today, which will be interesting following to Central Bank committee members stating they will be prepared to cut rates if we see a significant fall in data.