Source: Forex News
The Trump Administration announced their official recognition of Jerusalem to the reaction of Muslim nations around the world. Although the dollar did experience a slight slump, it seems that markets might be holding their breaths for tomorrow’s NFP announcement.
Why is this significant though, other than the potential rift that could potentially be created between the US and the already strained diplomatic relations with Muslim countries in the Middle East? This could potentially impact the main commodity M. Eastern countries export – crude. First and most vocal opponent of the recognition was S. Arabia which is one of the U.S.’s main ally in the Middle East and a primary purveyor of crude in the region. Beyond that destabilization in the region could cause a drop in the production of crude, pushing prices up as demand will likely remain unchanged. Another ally both economic and strategic, that already has a widening diplomatic rift with the west, Turkey has experienced demonstrations outside the U.S. embassy in Istanbul.
Beyond the Muslim world – U.K. Prime Minister Theresa May, German Chancellor Angela Merkel, French Prime Minister Emmanuel Macron, UN Secretary General Antonio Guterres and even EU Chief diplomat Federica Mogherini expressed concern about the unrest this move could create.
8 of the 15 countries of the United Nations Security Council called for an emergency meeting.
This announcement also reverses decades of progress made by the U.S. as a mediator between the Palestinian and Israeli sides and their dedication to a peaceful resolution of the ongoing conflict. Some political analysts and governments in the region believe that this not only undoes the U.S.’s work towards peace but any progress that has been made until now.
This could cause a global diplomatic rift – with the United States at the epicenter. This could potentially cause market volatility – as is per the norm when there is global political instability. As we saw just a few months ago with the frictions between N. Korea and the U.S. – investors will likely flock to safe havens in lieu of more mobile markets like Forex or stock.
In the current atmosphere it seems that markets are quiet, as they were when the N. Korean missile crisis initially. If the frictions and reactions continue though, we may see a turn towards metals, safe haven currencies, we might even see investors run towards cryptocurrencies like they did with the missile testing. There was in fact an observable increase of bitcoins price because of it.
If you are a trader, what does this mean to you though? At the moment nothing – other than unease and tension at the moment. The Trump Administration has also been hinting towards the release of a plan to resolve the Israeli-Palestinian making some people wonder if this is the first phase of yet to be revealed strategy. Although we might be witnesses to the initial stages of a solution to one of the longest conflicts in the Middle East it might come at a very heavy price.
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