US President Donald Trump sees further Iran strikes as unlikely if talks advance

US President Donald Trump sees further strikes on Iran as “highly unlikely” if talks advance. CNN reported on Sunday that his comments were conditional on progress in negotiations over Iran’s nuclear programme and the reopening of the Strait of Hormuz.

Trump linked any further military action to the agreement: “It depends on whether or not they sign a very strong agreement,” he said. He continued: “The answer is highly unlikely it will be necessary.” Trump added: “I would if necessary, but we hit them really hard,”

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Following last week’s US midterm elections, diplomacy returned to the spotlight. Qatar, the chief mediator between the US and Iran, said Iran was assessing proposals on its nuclear programme.

That assessment contrasted with comments on Sunday from Iranian Foreign Minister Abbas Araghchi. He said mediators had neither made progress nor taken action in the days since the US elections.

Separately, an attack by the Iranian-backed Houthis in Yemen damaged a landmark in the Saudi Arabian capital’s financial district. Offices belonging to oil giant Saudi Aramco also sustained minor damage on Sunday as the city repelled a fresh barrage of ballistic and cruise missiles.

Risk sentiment: key questions

Risk-on and risk-off: what do they signal in financial markets?

Investors’ willingness to take risk over a given period is commonly described using the financial terms “risk-on” and “risk-off”. Optimism about the outlook defines a risk-on market, encouraging investors to purchase riskier assets. Concern about the future produces the opposite response in a risk-off market. Investors favour safety, choosing lower-risk assets with more dependable returns, even when those returns are relatively modest.

Risk sentiment: which assets provide the clearest signals?

A favourable growth outlook typically lifts equities and most commodities, apart from gold, during risk-on periods. Stronger demand also supports the currencies of major commodity-exporting countries, while cryptocurrencies advance. Risk-off conditions instead tend to lift bonds, particularly major government bonds. Gold performs strongly, and safe-haven currencies, including the Japanese Yen, Swiss Franc and US Dollar, benefit.

Risk-on currencies: which tend to gain?

Commodity-exporting economies depend heavily on those exports for growth, making their currencies sensitive to risk appetite. In risk-on markets, the Australian Dollar (AUD), Canadian Dollar (CAD) and New Zealand Dollar (NZD) generally strengthen, alongside less widely traded currencies such as the Ruble (RUB) and South African Rand (ZAR). Commodity prices typically increase in these periods as investors anticipate that stronger economic activity will generate greater demand for raw materials.

Risk-off currencies: which tend to gain?

Demand for safety during risk-off periods typically supports the US Dollar (USD), Japanese Yen (JPY) and Swiss Franc (CHF). The US Dollar benefits from its role as the world’s reserve currency and from crisis-driven purchases of US government debt. Investors regard that debt as safe because the world’s largest economy is unlikely to default. For the Yen, support comes from greater demand for Japanese government bonds. Domestic investors hold a large proportion of these bonds and are unlikely to sell them heavily, even during a crisis. The Swiss Franc benefits because Switzerland’s strict banking laws provide investors with stronger capital protection.