Geopolitical risk is a key theme for FX markets today, driving the Japanese yen up over a percent against the greenback and sent gold skyrocketing. Washington stands at the ready to deploy additional strikes against Syria if they use chemical weapons, while North Korea is threatening nuclear attacks against the US as a navy strike team moves toward the Korean Peninsula. A senior official stated through their official news channel that “we will hold the U.S. wholly accountable for the catastrophic consequences to be entailed by its outrageous actions.”

Although Janet Yellen’s speech late Monday was mostly a non-event for markets, it did signal a policy shift as the era of stimulative monetary policy is ending. The Fed Chair said that the Fed will use monetary policy to sustain growth, not stimulate it further. Yellen confirmed that the economy is running at a good clip thanks to the stimulus efforts of the Fed, and “looking forward, I think the economy is going to continue to grow at a moderate pace.” Upbeat about consumer spending and the global economy, Yellen was concerned that productivity growth was “very low” and cautioned against Republican’s plans to roll back financial regulations such as Dodd-Frank.

UK inflation remains steady in March at a three-and-a-half-year high. Rising at an annualized 2.3%, it was exactly in-line with consensus expectations and the exact same pace of growth seen in February. However, the main contributors to the figure were food, alcohol, and clothing as core inflation fell to from 2% to 1.8%. Despite this slight miss, consumer prices beat estimates, accelerating 0.4% month-on-month ahead of analyst expectations, building GBP momentum throughout the morning.

Economic sentiment is at a nine-month high in Germany, according to this month’s ZEW survey. 27% of analysts surveyed see economic activity picking up in the next 6 months, and over 65% see development remaining firm at 7.5%. Euro is broadly underpinned on the news.

EURUSD:   Euro stronger as economic sentiment hits a nine-month high.

GBPUSD:  Sterling stronger as inflation holds at 2.3% in March and consumer prices beat estimates.

AUDUSD:  Aussie recovering early morning losses from risk-off moves to trade flat against the greenback.

USDCAD:   CAD slightly weaker against the greenback, but remains confirmed in a narrow range.

USDJPY:  Yen stronger by over 1% against the USD as investors take stock of escalating tensions in Syria and North Korea.