Theme of the week: Risk-on, risk-off - ING

"Rising geopolitical tensions last week may well have given investors a wake-up call when it comes to the fragile nature of 'global recovery' trades," argues Viraj Patel, Foreign Exchange Strategist at ING, said.

Key quotes:

"Rising geopolitical tensions last week may well have given investors a wake-up call when it comes to the fragile nature of 'global recovery' trades. Tail risks such as geopolitics, protectionism and the unwind of easy central bank money all provide valid reasons to remain cautious in chasing risk. This is especially true given that not all the foundations to what many have dubbed a 'synchronised' global recovery are actually in place; missing global inflation - and uncertainty over near-term growth in US and China - means that there are two-way risks to global growth."

"As investors countdown to Jackson Hole, the Fed and ECB minutes this week may shed light on the proximity of global tightening. It has been a strange environment to see markets relatively calm despite two of the world's biggest central banks both on the verge of making significant changes to their respective balance sheet policies. With global tightening around the corner, one would have expected carry trades to come under some pressure. We still think that August may be the month in which the 'penny (or cent) will drop' and see the dollar bloc currencies as being particularly vulnerable."