Give peace a chance

Good morning

The weather here was wonderful yesterday, sunny, not a cloud in the sky and yes, I did take some time to sit out and enjoy it.  While the weather may have been warm, equities were on fire, the German Dax was up over 5%, the FTSE 100 more matched US stock rises, up around 2.5%.  Majors held much of their gains against the US dollar although are off the highs, GBPUSD and EURUSD had managed to peak around 1.3480 and 1.1720 yesterday afternoon, now 1.3400 and 1.1665 respectively. UDSJPY had hit a low of 157.90 but is now back up to the 158.80 area.

The slight reversal in the weak US dollar comes as Asian equities slipped back overnight, and futures pricing points to a softer opening for Europe this morning.  Clearly concerns over the fragile Iran ceasefire and access to the Strait of Hormuz are appearing after the initial optimism and reports of attacks in Lebanon that could potentially damage the peace deal.  Adding to the uncertainty is Trumps ongoing criticism of NATO and his threats to leave the group or at least withdraw troops from NATO countries who he deemed unhelpful in the Iranian conflict. 

FOMC minutes were out yesterday evening but brought little new, with officials seeing elevated inflation risks as well as elevated risks to employment, leading to a bit of confusion over the direction of rates.  While many are still seeing cuts as possible, those cuts could come later than previously thought and there is certainly a more hawkish tone than I’ve seen for a while.

RBNZs Breman helped talk NZD up a touch as she said RBNZ would act decisively if core inflation were to pick up.  On growth, she said recent rates cut were helping but did expect some weaker data although added that growth could strengthen if the Middle East ceasefire holds.  AUDNZD is down to 1.2055, GBPNZD is currently 1.9045.

In sport, Liverpool lost 2-0 to PSG, hurting their chances of advancing to the semi-finals.  Atletico Madrid boosted their chances by beating Spanish rivals Barcelona 2-0.  Second legs are next week, Arsenal and Bayern remain favourites to lift the trophy, they will meet each other in the semi’s if they get through this round. 

Today bring US Q4 GDP although this is the final reading and isn’t expected to veer far from previous estimates.  Core PCE is normally a major piece of data but this is a delayed reading from February and as such is a bit outdated so it is possible these will come and go with minimum fuss.  Iran news will still dominate the headlines and offer more market impact.

Have a great day…

-  11.45 ECBs Sleijpen speaks

-  13.30 US GDP, Core PCE, initial jobless claims

-  23.30 NZ business PMI

-  02.30 China CPI

-  07.00 German HICP