India vs. China
A seven-week military standoff between India and China escalated into a deadly conflict along their contested Himalayan border on June 15-16 for the first time in more than four decades, signaling a sharp deterioration in ties between the two countries. India confirmed 20 dead, while China says it also has casualties.
Indian asset markets were knocked overnight as the news of this escalation played out, and INR 1m closed about 0.5% weaker on the day.
Traders expect the market to deal nervously today, with the news flow on this conflict worsening overnight. However, the worst is probably – or at least hopefully – behind us, as you can imagine there’ll be some panic-stricken diplomatic action to ease the situation.
South Korea vs. North Korea
USDKRW is on the rise as South Korean officials sound aggressive in response to North Korean actions, saying the latter will pay if it takes military action.
USD vs. Risk sentiment correlation
US stocks and the US dollar broke their multi-month tight, negative correlation as both rallied overnight. It was risk-on owing to comprehensive reports of positive trials of dexamethasone as a Covid-19 treatment; because it’s cheap, it could also be of enormous benefit in developing countries. This is on top of reports the US administration is mulling a $1 trillion infrastructure proposal, and US retail sales were beating all survey forecasts.
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