With markets in a tizzy over the impending Trump announement on Iran, are we just seeing more horse trading in the follow through from North Korea?

North Korea is a nuclear threat. They’ve been under sanctions for ages but still proceeded with their nuclear agenda. Now they’re close (supposedly) to strapping a nuke to a missile and sending it around the globe to the US, we’re getting a peace deal. Any significance? Peace of any sorts is better than hostilities, even sometimes when there’s a loaded gun behind it.

Iran is in a pretty similar position to NK. They may not be as advanced as NK but the nuclear/sanctions situation is pretty much the same. If it takes having that loaded gun to get folks to the negotiating table, who can fault Iran from thinking about using NK as a model to get themselves out of sanctions? I’m not suggesting that is what’s happening but who can rule it out.

Trump called the Iran deal flaky from the off. It’s suspected that Iran isn’t really playing ball properly so what’s the point of Trump backing a deal that isn’t working? He’s shown he’s ready, willing and able to pullout of big deals he doesn’t like. The world is looking for bad news to come of this and markets are reacting accordingly. If the deal collapses, Iran is pretty much free to carry on or increase it’s nuclear program, irrespective of sanctions. Geo-politcally, Iran is a whole different ball game to NK, and the market is right to take a dim view of it.

So, what’s the outcome?

This one is another tough trade for Trump, and given the historical US/Iran dynamics, an NK solution may be harder to come by. With a possible NK deal on the cards he’s set a standard now. That’s the downside to his strategy of getting these big issues and countries around a table, everyone now thinks they can use the same tactics. But, he’s getting stuff done with trade, with China, with North Korea and elsewhere, so who’s to say he can’t get something done with Iran? Trumps style is to tell us all how bad a deal is and lay it on thick about the party concerned but what we’ve also seen is the olive branch offered that things can be renegotiated. That’s what we should be on watch for today. The market is set up for some bad news so if there’s good news mixed in, these risk trades could reverse just as quickly.

There’s a hell of a lot happening this week with NAFTA, more China trade talk and the BOE, to name a few, and sometimes it can all become too much for the market to trade. When that happens, a lot of traders take the simple option. They square up and kick back until the lay of the land becomes clearer. It’s all about risk folks, and as traders we need to know when things are too risky to trade.

That doesn’t mean we need to stop trading altogether but we need to be smarter picking our battles and assessing how much the short-term noise may be affecting the longer-term picture. As I mentioned earlier today, things are looking messy and that’s not a scenario I like to trade. We’re in a week of big headline risk and that can come at anytime, not just at the scheduled moments like Trump later. Trump loves a tweet and we could well get some heads up on what he’s going to be saying later well in advance. For me, if I trade, I’m going to keep it light and well managed. I don’t need to hammer it through all this risk as markets will be there tomorrow, next week and the weeks/months after.

Take care and stay safe.

Ryan Littlestone

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