Concerns continue over escalation of tensions in the Middle East

Good morning

Welcome back, I hope you had a wonderful weekend.  I managed to get out do some light work in the garden on Saturday, the sun was just too tempting and although it was still a bit chilly, it was great to see blue skies and feel the odd bit of warmth from the sun.  Must admit after a period of time of being pretty inactive, I’m aching a lot now but the new shoulder stood up pretty well to the demands I put on it, light as they were.   The clocks changed here at the weekend, this is the one that for some reason has historically hit me unreasonably hard, not helped this time I guess by getting up early to watch the Japanese F1 grand prix on Sunday morning.    

US data releases and options expiries are back to normal time (13.30/15:00 and 14:00) after our clock change brought us back in line with the US.  

The Iranian war continues with little sign of de-escalation, with Yemeni Houthis joining the conflict over the weekend.  Iran is not backing down to US demands and there is talk of possible ground operations involving US troops, while Trump is also looking at taking control of Iran’s major fuel hub, Kharg Island.  With Iran still able to launch missile attacks both of these strategies would likely see larger numbers of US casualties than we have previously seen in the conflict although I do feel that some US losses have not been reported.  6^th April is Trump’s latest deadline for Iran to open the Strait of Hormuz but they have so far shown no sign of agreeing to these demands.

EU and US markets were down on Friday, Asian markets were down overnight and futures prices point to further losses when markets open this morning.  Oil prices pushed higher overnight although are off their overnight highs as I type, and the US dollar opened higher, a move that has recently been a signal of lowered risk sentiment.  GBPUSD is currently 1.3250, EURUSD 1.1500 and USDJPY, which had broken above 160 on Friday extended gains too hit 160.45 at one point but has since slipped back to 159.60 following the usual warnings from Japanese officials, plus some talk of potential rate rises through this year and next which could see rates up around 1.5%.

ECB officials have urged patience on rate moves as central banks look to the difficult decisions higher oil prices will undoubtedly bring.  I’m still not sure rate rises will help in any way to soften any inflation rise based solely on higher energy costs, indeed cuts now would go a long way to supporting our fragile economy, but I’ve seen such little commentary that supports my thinking that I can only presume I’m somehow wrong.  Only RBNZs Breman has come close, saying RBNZ will not be rushed into reacting to higher fuel prices. 

Some countries are beginning to introduce measures to protect citizens from rising fuel costs.  Australia is removing charges for heavy road users and halving fuel duties for three months, although with talk of three potential RBA rate rises in May, June and August, Aussie rates could climb as high as almost 5% by the summer.  We’ll have the RBA minutes overnight from the March meeting where rates were raised 25bps. 

Not much on the calendar today although Feds Powell does speaks later, I’d imagine he’d come across as relatively hawkish if he were to mention rates, I wonder if central bank independence will be on his agenda as well. 

UK Q4 GDP due early tomorrow morning, we’ve already had preliminary data and I haven’t seen anything suggesting we’ll be different from those pretty soft numbers.  The rest of the week brings Japan and EU inflation, ISM services and manufacturing PMIs and retail sales from the US, plus plenty of US jobs data including the nonfarms on Friday.  Yes, that’s Good Friday to us in Europe, but although the US stock markets are shut on Friday that doesn’t seem to stop them releasing one of the month’s biggest economic data numbers. 

Have a great day…

-  10.00 EU consumer confidence

-  13.00 German HICP

-  15.30 Feds Powell speaks

-  21.00 Feds Williams speaks

-  02.30 RBA minutes

-  00.30 Japan Tokyo CPI

-  00.50 Japan retail trade

-  07.00 UK GDP