Macro Strike: Afghanistan Airport blast kills over 70 people, including 12 US Service Members, Biden on the tape…

Strike…

• So super fluid Asia Friday morning start, so story & overview still in progress, but we may be off to a risk-off start to the day…
• which would leave the Macro Dragon looking for a potential lower USDJPY 110.08…

• … as well as the likes of AUDJPY 79.70 from their current levels. Its also worth noting that whilst USDJPY was basically flat overnight at +6bp, AUDJPY came off by 45bp.

• Its worth noting that S&P Futures are up +0.12% at 4471.75 in the very early Asia session (0622 SGT/HKT). Whilst Asia Equity futures are looking a little soft pre-market, so by no means screaming risk-off. Likely the real test (of this potential risk-off Asia start skew) will come with the Tokyo & Hong Kong respective opens over the next 1hrs & 3hrs
• The thorn in the Biden administration side that will not go away, just got pushed in deeper, with a blast talking place in Kabul Airport hours ago. In addition to dozens being injured, there are over 70 dead, 12 of whom are US Service Members. The attack seems to have been carried out by ISIS-K, an Afghan faction of the Islamic State terrorist group.
• We’ve already seen Biden on TV post the event (34min in), sticking with the 31 of Aug exit day & dropping a few other things:
• “To those who carried out this attack, as well as anyone who wishes America harm, know this: We will not forgive. We will not forget. We will hunt you down and make you pay,”
• Naturally the US is still in exodus mode with thousands of US citizens & Afghan Allies (over 100K taken out in last 2wks), still on the ground.
• So an outright harsh response is almost off the cards, as the potential collateral damage of turning a botched & poorly executed exit strategy, could go from Quasimodo to ground zero
• Its also worth noting there is nothing to suggest Taliban involvement, there are a lot of different factions in Afghanistan – if not a lot of fragmented factions within the Taliban Umbrella itself. Yet ISIS views the Taliban as an enemy & vice versa.
• It’s a very smart strategy of ISIS if their goal is to incite conflict & a kick-off between the Taliban & the remaining US forces, citizens & Afghan Allies.
• Now this could simply be a one-off incident & things calm back down, or it could on the other extreme be the start of a string of more & escalating attacks to coincide with the 5 days left that the US has set to get the hell out of dodge.
• Naturally security & control will be ratcheted up to 11, by both the Taliban & the US forces, yet you don’t need suicide bombers to cause havoc, just a few rocket launchers in a country filled with weapons of war, could easily force airplanes to stay grounded – thereby challenging the Aug 31 exit (which is also my understanding a hard deadline from the Taliban)
• From a longer term horizon, there are likely no long-term effects on cross-assets prices, yet where there is likely huge implications is in regards to US foreign policy in the future, i.e. the probability of American military involvement on foreign shores is likely structurally lower for administrations to come. At the very least, it is going to be very controversial & divisive.
• Wed, Sep 1 – Please join us next week when we set up a one of a kind webinar on Afghanistan: Return of the Taliban with Former US Ambassador to Afghanistan, Mr. Hugo Llorens, alongside our CIO & Chief Strategist Steen Jakobsen, who will be hosted by the always interesting Lester Chan, Greater China Head of Wealth Management.
• And all this on the cusp of Jackson Hole – which we’ll do a separate Macro Dragon piece on. In case you missed our in-house Economist Dembik take, he expects it to be boring: If you don’t expect much, you won’t be disappointed!   

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Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is The Way

Namaste,
KVP