Hopes of a US-Iran peace plan pushes equities higher, USD lower

Good morning

We saw a bit of US dollar weakness creep back in yesterday while equity markets pushed higher once again, almost as though the Iran ceasefire wasn’t at risk of collapse and ships were travelling freely through the Strait of Hormuz.  European markets are opening higher this morning, following similar moves in the US and Asia.  Oil prices are a little lower but remain over $100 but I’ve seen no news that offers any optimism other than some vague suggestion of a US-Iran peace deal by Trump.

We saw another round of USDJPY selling earlier this morning, the pair was trading around 157.80 before dropping sharply to almost 155.00, it has since recovered some of those losses, now at 156.50.   Intervention hasn’t stopped speculators though with at least one major bank talking about buying USDJPY on dips, citing the idea that intervention can slow yen deprecitation but cannot reverse it completely.  GBPUSD and EURUSD had been trading around 1.3565 and 1.1720, already impacted by the generally weak USD, then the USD selling took those pairs to 1.3595 and 1.1740. They both remain within 10 pips of those highs. 

Worth pointing out that UK 30 year bond yields hit their highest level since 1998 yesterday, while 10 year yields were at their highest since 1998.  The glimmer of hope for peace has seen those yields drop a little this morning but remain at elevated levels.  The cost of living is on the rise, retail chain Next has announced it will raise prices by nearly 10% is some countries outside Europe deu to rising costs although UK stores won’t see these rises.

Global oil reserves have dropped sharply, no major surprise there of course but the fuel shortages could well lead to flight cancellations, indeed reports in the press suggest some 13,000 flights have already been cancelled in May, while some airlines have switched to smaller planes in an effort to save fuel.  Unless there is a rapid peace deal in Iran, we’ll certainly see more flight cancellations into the summer months but the end of this month brings UK half-term and it will be interesting to see whether travel plans are affected.

In sport, Arsenal rounded off their already great week by beating Atletico Madrid in a tense semi-final second leg to put them into the finals.  Atletico can think themselves a little unhappy with some of the decisions, they could easily have been awarded a penalty, but hey, that’s football.  Arsenal’s opponent will be decided tonight as we hope for another nine goal thriller between PSG and Bayern Munich after their first leg ended 5-4 to PSG.   

Several central bank officials speaking today, US ADP may be of interest but we’ll of course be looking for any sign that Trump’s suggestion of peace in Iran is actually real. 

-  09.00 ECBs Lane speaks

-  09.20 ECBs Cipollone speaks

-  10.00 EU PPI

-  13.15 US ADP employment

-  14.30 Feds Musalem speaks

-  15.00 CAD Ivey PMI

-  18.00 Feds Goolsbee speaks

-  00.50 BoJ minutes

-  02.30 AUS trade balance