In response to the overnight news that North Korea had conducted its first ever ICBM test - despite both the US and Russia saying the Hwaswong 14 missile launched was at beast an intermediate-range rocket...

... moments ago Sec. State Rex Tillerson issued a statement, in which he said that "testing an ICBM represents a new escalation of the threat to the United States, our allies and partners, the region, and the world."

He said that the "U.S. seeks only the peaceful denuclearization of the Korean Peninsula and the end of threatening actions by North Korea. As we, along with others, have made clear, we will never accept a nuclear-armed North Korea." The problem is that North Korea is now not only nuclear-armed but, according to today's events, it is close to being able to deliver the nuclear package to the US.

Which is why Tillerson, stopping short of endorsing military action, said that “we intend to bring North Korea’s provocative action before the UN Security Council and enact stronger measures to hold the DPRK accountable." The secretary of state also said that President Trump, and the national security team continued to assess situation.

Tillerson's full statement is below.

Meanwhile, as Tillerson was dictating, Reuters reported that according to North Korea's KCNA news agency, Pyongyang said it had conducted a test of a newly developed intercontinental ballistic missile that can carry a large and heavy nuclear warhead and that the test successfully verified the warhead's atmospheric re-entry.

Kim Jong Un further said the successful test completed the country's strategic weapons capability that includes atomic and hydrogen bombs and ICBMs, and it will not negotiate with the United States to give up those weapons until Washington abandons its hostile policy against the North, the country's KCNA news agency said.

The North Korean leader also said he is "firmly determined and committed" to test an ICBM that can hit the U.S. mainland within this year, KCNA added. Providing some more details on yesterday's launch, the North Korean news agKim also said that the U.S. must be upset with "gift package" that he sent for its Independence Day and says he will send more in futureency said that yesterday ICBM test showed the country's capability of carrying newly- developed, large-sized nuclear warhead and that N. Korea had tested ICBM for re-entry capability.

* * *

Finally, and most disturbingly, Reuters said that South Korea and the United States early on Wednesday "conducted an offensive ballistic missile drill aimed at striking the North's leadership."

Bloomberg adds that South Korea and the U.S. conducted a joint ballistic-missile drill around 7am on Wednesday, shooting rockets into the Sea of Japan, to warn against North Korea’s continued provocation of ballistic-missile tests, South Korea’s Joint Chiefs of Staff said in a statement. The drill reportedly showed S.Korea, U.S. can hit N.Korea’s leadership in "contingencies."

From the statement:

Eighth US Army and Republic of Korea (ROK) military personnel conducted a combined event exercising assets countering North Korea’s destabilizing and unlawful actions on July 4. This exercise utilized the Army Tactical Missile System (ATACMS) and the Republic of Korea Hyunmoo Missile II, which fired missiles into territorial waters of South Korea along the East Coast. The system can be rapidly deployed and engaged. The deep strike precision capability enables the ROK-U.S. Alliance to engage the full array of time critical targets under all weather conditions. The ROK-U.S. Alliance remains committed to peace and prosperity on the Korean Peninsula and throughout the Asia-Pacific. The U.S. commitment to the defense of the ROK in the face of threats is ironclad.

The drill was ordered by S. Korean President Moon Jae-in with President Donald Trump’s approval. A video of the missile launch is below:

#Breaking: South Korea and the United States conducted a joint ballistic missile drill in response to North Korea https://t.co/DLfQSmDafE pic.twitter.com/n0RfaxpP1C — The Situation Room (@CNNSitRoom) July 4, 2017

As suddenly the threat of an out of control escalation by both sides appears all too real, the safe haven Japanese Yen currency is surging - which is ironic because if NKorea were to indeed strike Tokyo, the value of Japan's currency would crater, and yet this is how algos operate - with the USDJPY tumbling as low at 113.