FX round-up: North Korea risks persist as Greenback firms ahead of Yellen speech
Safe haven currencies were lower on Tuesday, paring gains following the latest round of North Korean rhetoric.
Monday saw the Japanese yen and Swiss franc catch bids on the latest comments from Pyongyang who stated that President Trump's comments that he would eradicate North Korea were a "declaration of war".
Foreign Minister Ri Yong-ho of North Korea shot back, saying "The whole world should clearly remember it was the U.S. who first declared war on our country," adding "Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country."
USD/JPY has since rallied, trading 0.47% up on the day to 112.25 with USD/CHF trading 0.48% higher to 0.9712, as traders close out positions and eye Fed Chair Janet Yellen's speech due at 1745 BST titled, "Inflation, Uncertainty and Monetary Policy."
"The dollar tends to fall on flare ups in North Korean-related matters, but whether the Federal Reserve can hike interest rates in December as they projected still remains the ultimate decider," said Shin Kadota, senior strategist at Barclays in Tokyo.
The US dollar is trading at it's highest level this month against a basket of currencies, with the dollar index 0.58% firmer to 93.181, despite data out on Tuesday showing consumer confidence in the US was down to 119.8 after a revised figure of 120.4 last month while new home sales were also down to 560,000.
EUR/USD was traded 0.68% lower to 1.1766, with traders voicing doubts that German Chancellor, Angela Merkel can find any common ground with coalition parties, after narrowly winning German elections on Sunday.
"It is the sentiment after the German elections on Sunday (that is causing this move) [...] There's [...] uncertainty whether Merkel can find common ground between the three different parties," said Nordea currency strategist Niels Christensen.
Against thatbackdrop, all eyes were fixed on French President Emmanual Macron and his speech on his vision for a future Europe.
President Macron called for a shared border police, a joint defence force and budget, plus a Europe-wide carbon tax.
Kathleen Brooks at City Index said in a note, "While we think that the German political fears are overdone, we also believe that the market is using the backdrop of the German election as an excuse to sell the euro after its 15% increase so far this year."
Sterling fell to it's lowest level against the dollar for the last 10 days on Tuesday, attributed by traders as a continued sell-off from Friday's speech by British Prime Minister Theresa May. Observers said that May had failed to give enough concrete details on Britain's negotiating position.
Credit Agricole said in a note, "UK PM May's landmark speech on Brexit negotiations was a step forward and reduces the risk of an early end to the negotiations and ultimately of a cliff-edge departure by the UK in March 2019," adding, "That said, the speech lacked the precise negotiating position needed to unblock the talks in the short term, thus discussions about the future relationship are unlikely to start before year-end."
Cable currently trades 0.28% lower to 1.3430 while the pound was 0.36% firmer against the euro.