After threatening to attack the Syrian government on Wednesday, following its apparent use of chemical weapons against a civilian target, President Trump has again surprised by tweeting earlier today that “Never said when an attack on Syria would take place. Could be very soon or not so soon at all!” Tensions had been high in the region, with risk assets selling off moderately after Wednesday’s initial statement. The new tweet from President Trump immediately boosted stocks and other risky assets and is being interpreted as a potential climb-down from American military action, which had seemed imminent. What caused the new tweet and what does it mean?
There has been a great deal of push back among the President’s natural supporters in the U.S.A. against the idea of attacking Syria. Many have dug out old tweets from Trump when President Obama made similar threats, which basically said that attacking Syria is a waste of time and money. This opposition may have made President Trump pause, yet I don’t believe this has been the crucial factor. Simply put, Syria has become a very complex theater of conflict involving the Syrian government, Islamists, other domestic opposition forces, Russia, America, Iran, Israel, Turkey, and the Lebanese Hezbollah – all within close range of the British military bases in Cyprus. It is extremely complicated. While the apparent use of chemical weapons is a consideration for the United States, I suspect there is something else going on in Syria which threatens to change the balance of power between these forces, of which we are not fully aware. The President’s tweets are most likely a pressure tactic within a complex negotiation between all the parties, which is probably playing out behind the scenes as we speak.
It sounds cold-hearted to speak like this, but it pays traders to take the correct view on whether there will be a serious American attack or not, what reaction it is likely to provoke, and what it will mean for the markets if it happens or doesn’t happen. War can be expected to boost Gold, Crude Oil, the Japanese Yen, and perhaps the U.S. Dollar. If it doesn’t happen, expect the opposite, and a rise in stocks. It will probably become obvious that the Americans will not attack seriously when further conciliatory statements come from both the U.S.A. and Russia.
At the time of writing, markets are seeing some movement which seems to have been triggered by the tweet. The cryptocurrency Bitcoin shot up by approximately 13% against the U.S. Dollar, which is an unusually large amount of volatility by its recent standards.
