• After the airstrikes on Syria early on Saturday, the situation seems contained. 
  • There are growing chances of a relief rally, positive for the USD/JPY.
  • For the USD/CAD, the event is a double-edged sword, but the Canadian Dollar could come out on top.
  • Early on Saturday morning, US President Donald Trump announced a coordinated missile and airstrike on Syrian chemical weapons installations alongside the UK and France. He added warnings to Iran and Russia, the Assad regime’s allies. Trump also discussed “sustained action,” raising fears of an ongoing campaign. Russian President Vladimir Putin said that the attack was an act of aggression and offered Syria sophisticated air defense systems.

    Yet later on things calmed down. A heated debate in the UN Security Council led to no resolution and served as a venting venue. Trump then tweeted “Mission Accomplished,” the infamous phrase that President George W. Bush used after the initial campaign in Iraq in 2003 and also the British government is not keen on further action. No Russian soldiers were hit.

    The Syrian civil war is not over, and the government in the war-torn country may still possess more gas agents despite the strikes on April 14th. Iran may continue clashing with Israel, Syria’s neighbor and the region is not known for its stability in general. Given the bleak history of the civil war, there is a high chance that many more civilians will lose their lives by conventional weapons shortly.

    But for financial markets, the current episode that began with Syria’s use of chemical weapons against its citizens on April 7 will probably be seen as over. The Syrian theme was in the news throughout the second week of April and caused some jitters in the markets. Stocks were shaken and oil prices, already buoyed by a favorable supply and demand balance, pushed to the highest levels since 2014.

    What is next for financial markets? At the moment, the situation in Syria seems to be contained, and markets may move on to normal topics: economic indicators, interest rate differentials, etc.

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