Middle East escalation and a Surging US dollar

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In a significant escalation of hostilities in the Middle East, Iran fired missiles into Iraq, resulting in casualties. Reports indicate that at least one missile hit very close to the US Consulate in Erbil. Beyond the provocation towards the US, the act of firing missiles into a neighboring country by Iran is likely to prompt a response.

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Additionally, unsettling news emerged that members of the Islamic Revolutionary Guard Corps (IRGC), a branch of the Iranian Armed Forces, are collaborating with Houthi terrorists in Yemen to target sailors on merchant ships in the Red Sea.

As Asia's liquidity entered the markets, there was an upward movement for the USD. In contrast, major currencies such as EUR, AUD, NZD, CAD, CHF, GBP, and JPY all experienced losses. Notably, despite the geopolitical tensions, US yields remained supported.