SINGAPORE SUMMIT AND WHAT IT MEANS FOR FOREX MARKET

12th June 2018 was a historic day, with US President Donald Trump and North Korean leader Kim Jong Un signing a denuclearization agreement in Capella Hotel, Singapore. It finally brings peace (hopefully!) to the long troubled Korean Peninsula. The agreement is a joint statement between Donald Trump and Kim Jong-Un, to work towards the complete denuclearization and permanent peace in the Korean Peninsula. Further, Trump agreed to suspend military exercises with South Korea and to remove US troops from South Korea.

Global equity market was relatively muted and global indexes ended majorly in green. The summit had a tepid impact on gold prices. Investors treat gold, silver, and platinum as safe haven assets and use these to invest at the times of uncertainty. Gold prices were slithering higher, up 0.2% trading at $1,299 an ounce on 13th June 2018. WTI Crude Oil prices were seen trading at $66.07 a barrel. The current price of gold as on 21st June is almost $1300 per ounce and crude oil is trading at $65.45. This indicates that the summit was not considered a major event by the investors and had no strong impact on the two commodities.

What would be more interesting to analyze is the long-term impact of peace on Bitcoin and other cryptocurrencies. Though the hacking scandal had a bigger impact on crypto than the summit, peace in Korea can actually bring negative effect for blockchain assets. As the threat of a war decreases, Bitcoin fanatics’ argument of it being the only tenable currency during a nuclear war becomes easier to ignore.  Bitcoin and other crypto-coins are supposed to be the alternative to fiat currency and easier to use especially during times of political turmoil. Reports of widespread use in Venezuela during the inflation crisis led to many believers hailing Bitcoin as the ultimate currency, especially during the standoff between the United States and North Korea. Peace seems to have laid waste to this particular theory for now.

Forex markets remained relatively stable though they should have been the first to see a direct impact of any fallout of the summit. But it seems that institutional and other sophisticated investors had priced in the summit and were already in the know of the obvious end result.

Conclusion

The summit generally received positive international reaction. Mostly, countries praised the decisions of both the leaders, Donald Trump and Kim Jong-Un, taken during the summit. All the three main US stock indexes closed on a positive note after the summit showcase that the markets are relieved that Trump or Kim did not stray from the planned path and that there is a real chance for peace.  The biggest beneficiary should be South Korea and Japan, immediate neighbors to North Korea. Investors in these countries stock markets would be relieved as the ratcheting war of words between Trump and Kim was making the markets nervous. With the risk of a Nuclear War subsiding, companies can now start focusing on growing and investors can get back to micro fundamentals.