Eyes on Iran peace talks as end of ceasefire deadline nears

Good morning

What a belter of a weekend.  Sun was shining which of course always makes a difference, out with the family in London on Saturday celebrating my wife’s birthday, and a fair bit of gardening which is always a pleasure when the weather’s good, although I must say I’m aching today which shouldn’t be a great surprise given I’ve don’t little in the two months since my shoulder operation.  Did watch the Arsenal match as well, their loss to Man City opens the title race wide open, promising an exciting last few matches of season. 

At the other end of the table, well if it could have gone badly for Spurs, it did.   Almost had three points in the bag after a spirited performance before conceding a last minute equaliser, Leeds and Forest winning, just looking for West Ham to win this evening and there will be some distance between Spurs and safety with time running out.  It’s not looking good at all. 

To the markets and we wake up to the news that the US have attacked and seized an Iranian ship that tries to get around the US blockades.  Iran closes the Strait of Hormuz after some suggestion they’d open it for peaceful travel.  The ceasefire deadline ends tomorrow, US officials are in Pakistan for peace talks but both sides are still too far apart.

European equities have opened lower, oil prices opening higher and the US dollar has pushed higher as the hopes of peace potentially disintegrate and fears of renewed military action build.  Still, oil remains well below $100 and the US dollar is still well off its recent highs, which does suggest there is still some hope left. GBPUSD is hovering around 1.3500, EURUSD is 1.1765 each having seen highs around 1.3600 and 1.1850 last Friday.  USDJPY had a dip to 157.60 on Friday afternoon but is now back up to 158.85.

UK PM Starmer addresses Parliament this afternoon over the Mandleson affair.  There have been calls for him to resign over claims he must surely have lied about his knowledge of Mandelson’s history and security vetting failurs but I think it is unlikely he will do so, instead he’ll plead innocence and pin the blame on others, indeed Olly Robbins of the Foreign Office was sacked last week over the scandal.  Meanwhile the FT says Manchester Mayor Andy Burnham could be on track to launch a leadership battle for the Labour Party.

Canadian CPI inflation is the main event today, overnight we’ll have NZ’s CPI and then early tomorrow morning we’ll hear the latest UK employment situation.  The rest of the week brings UK inflation and retail sales, US retail sales and EU, UK and US PMIs.  Iran ceasefire and peace deal talks still likely to overshadow any economic data.

Have a great day…

-  13.30 CAD CPI

-  15.30 CAD business outlook

-  15.30 UK PM Starmer talks

-  23.00 NZ NZIER business confidence

-  23.45 NZ CPI

-  07.00 UK unemployment

Uneasy calm on continued hopes for peace in the Middle East

Good morning

Yesterday was generally calm in the financial markets, a day of little data.  Equities were more mixed with US markets making small gains but Asian markets ended the week with a down day.  Futures prices points to an uncertain open in Europe.  The US dollar is a touch stronger across the board, GBPUSD currently 1.3510, EURUSD 1.1775 which puts GBPEUR a touch lower at 1.1470.  A recent poll of economists suggests ECB may be forced to make one 25bps rate rise in June. 

USDJPY has lifted with the stronger US dollar, now 159.50, unsurprisingly drawing defensive comments from Japan officials who are quick to point out that other currencies have also weakened against USD over the past day or so.  Some attention on whether BoJ will raise rates at their meeting later this month to address the weak Yen, but with BoJs Ueda highlighting the Middle East crisis is weighing on the Japanese economy, a rate rise could be unlikely.

US rates are also in focus, with Feds Miran insisting there is no clear reason for delaying rate cuts although it seems the market disagrees, with forecasts for any cuts being pushed back until later this year, while some major banks are saying any cut in 2026 is unlikely. 

Australia’s Treasurer Jim Chalmers has warned of war-led inflation risks prompting forecasters to consider a rate rise early next month, his comments coming on the back of a very high inflation reading earlier this week.  AUDUSD failed to breach that 0.7200 area and is now 0.7165, AUDNZD holds near recent highs at 1.2180 and GBPAUD is around 1.8850, its lowest level for about a month. 

Eyes of course on the ceasefire in Iran and whether any lasting peace deal can be agreed.  Trump seems certain that an agreement will be found, also pleased with Israel’s ceasefire with Lebanon.  In typical Trump style, he applauded himself with now having put an end to ten wars, without making it clear exactly which wars he has ended.   Regardless, the is optimism a deal can be struck in the coming days although I think it is fair to say that whatever the outcome, the global energy markets will take a very long time to recover and indeed may never return to what we considered as  ‘normal’. 

In sport, Aston Villa, Notts Forest and Crystal Palace all progressed to their respective semi-finals.  Villa will play Forest meaning there will certainly be one English club in the Europa league final and there is even an outside possibility that Forest, should they win, could be in the Champions League next year while playing in the Championship should they get relegated.  Not sure anyone has managed that before although Spurs did their best last season.    

We have a pretty vital weekend of premier league action with important matches at both ends of the table.  At the bottom, Spurs, desperate for points, have their work cut out against Brighton, Leeds will hope to pretty much ensure league safety if they win against Wolves, while Forest will be looking for points as they take on struggling Burnley.  If Leeds and Wolves win, Spurs could be in real trouble.  At the other end of the table, Chelsea take on Man Utd, Everton and Liverpool meet in the Merseyside derby, but the main event has to be Man City v Arsenal, not quite a title decider but not far off.  

It’s a limited calendar today but things liven up next week with inflation, unemployment and retail sales from the UK, US retail sales, Canadian and NZ CPI plus EU, UK and US PMI’s.  Plenty to keep us busy and that’s before we have any news from the Middle East. 

Have a great day, and a great weekend as and when it comes…

-  10.00 BoEs Breeden speaks

-  17.30 Feds Daly speaks

-  19.00 Feds Waller speaks

Relative calm in markets on peace talk hopes

Good morning

European and US markets were mixed yesterday but Asian markets made gains again overnight, the Nikkei was up over 2%, winning back losses made since the start of the Iran war.  The US dollar remains on the back foot with GBPUSD holding in the high-1.35s and EURUSD just touching 1.1800, while USDJPY sits at 158.80 having had a brief test to 158.25 overnight on comments from Japan FinMin Katayama who said she had held thorough talks with US TrySec Bessent over FX levels and remained ready, willing and able to take ‘bold’ action if necessary. 

UK GDP this morning beat expectations at 0.5% although this comes from pre-Iran war and as such is perhaps too backward looking to be of much use.  GBP was barely moved, GBPEUR is just above 1.1500 having dipped to 1.1490 yesterday but that is hardly news.  Meanwhile ECBs Schnabel has said ECB are well-placed with low rates and low inflation which will give them time to assess the impact of the Middle East without being pushed into any rash decisions. 

Oil prices are pretty stable with WTI at $92 and Brent at $95.50 as the US blockade of Iranian ports continues.  Iran has warned that they will block movement in the Persian Gulf, Sea of Oman and Red Sea if the blockade continues but with peace talks due to take place there is a hope that Iran will allow ships to pass through the Strait of Hormuz without interference. Optimists are looking for a peace deal but this hasn’t stopped the Pentagon from reportedly contacting GM and Ford with a view to expanding production of weapons and military hardware. 

The main mover has been AUD which initially found support on generally better risk sentiment but was pushed further by a higher inflation figure overnight, coming in at 5.9% against 5.2% last time.  AUD strength was also helped by some reasonable employment data which saw a headline gain of 18k jobs, driven by a rise in full-time employment at the expense of part-time jobs, the reverse of last month’s release.  AUDUSD rose to within a few pips of 0.7200, almost matching the high we saw in March, which in turn was the highest since June 2022.  AUDNZD is up to 1.2160 and GBPAUD down to 1.8880 from a high this week near 1.9150.  RBA rate rises still firmly on the agenda.

In other news, US footwear firm Allbirds had a pretty spectacular day’s trading yesterday.  It announced back in March that it had sold its footwear business for $39m and yesterday announced it was rebranding as NewBird AI and will offer AI infrastructure to firms currently unable to access the computing power they require.  The stock price jumped form around $2.50 to around $24 before closing $17, nearly a 600% rise.   As with anything, timing is key.  Had you bought in the last few months you’d be very nicely in the money but long-term holders will have seen Allbirds share price hit a high of almost $578 in late 2021 giving it a market cap of some $4bn.

In sport, Arsenal scraped through to the Champions League semi-finals with a dull 0-0 draw at home to Sporting, while Bayern Munich also proceeded to the next round by beating Real Madrid 4-3 helped by two very late goals in a thrilling match.  Bayern will face PSG in the semi-finals, Arsenal will take on Atletico Madrid.  Having made it to the semi-finals, Arsenal’s attention now turns to Sundays key Premier league match against title rivals Man City.

This evening Aston Villa and Notts Forest are playing in the Europa League, Villa with a 3-1 lead after the first leg, Forest are level after a 1-1 draw at Porto.  Meanwhile Crystal Palace take a three goal advantage into their UEFA Conference League match against Fiorentina. 

EU inflation numbers this morning but they usually come and go with the minimum of fuss.  Once again we have several central bank speakers on the agenda, with little in the way of major data.  Tomorrow’s calendar looks pretty quiet as well but we’ll be watching for any news form Iranian peace talks.

Have a great day…

-  10.00 EU HICP

-  11.00 Buba monthly report

-  12.30 ECB minutes

-  13.30 US philly fed survey, initial jobless claims

-  13.35 Feds Williams speaks

-  14.00 ECBs Schnabel speaks

-  14.15 US industrial production

-  15.35 Feds Miran speaks

-  16.40 BoEs Taylor speaks

-  17.45 ECBs Nagel speaks

-  19.30 ECBs Lane speaks

-  20.00 BoEs Taylor speaks