Good morning
The slightlly improved risk sentiment we had seen over the past few days has been shattered with news of Israeli attacks on Iran. Oil prices have moved higher with WTI up from $82 to $85.50 and Brent from $86.75 to a high of $90.70. Gold also leapt higher from $2375 to $2417. However all are well of those highs now, perhaps it was the headline ‘Israel launches attacks on Iran’ that sent them marching higher, particularly the speculation that one attack had hit an Iranian nuclear facility, but the somewhat limited scale of the attacks have encouraged the market this is not a major escalation. Still, I don’t like where this is heading at all.
The US dollar also pushed higher against most majors on the reports, GBPUSD traded down to 1.2390, EURUSD to 1.0610, but these too have reverted to pre-attack levels around 1.2430 and 1.0645. Yen proved itself as a safe haven currency once again, bucking the trend by strengthening against USD, USDJPY hitting 153.60 at one point but has not reverted to the 154.40 area. Yen may also have had a bit if support from Ueda who reiterated the idea that, should they see a large impact on inflation from a weak yen, BoJ could raise rates.
It was another day full of central bank speakers yesterday. ECB officials all seemed confient that barring any major surprises, they’d be cutting rates in June regardless of whether Fed were cutting rates. ECBs Holzmann did however suggest that the number of ECB cuts could be limited if the Fed chose not to make any rate cuts. Fed officials continue to play down any chance of a June cut, Kashkari said he’d be happy to keep rates unchanged while both Bostic and Williams are open to higher rates if needed, although their base case is for one 25bps cut this year.
This morning we have seen the latest retail sales data from the UK. They don’t make great reading, the March headline came in at 0% against an expected +0.3%, while March excluding fuel was down to -0.3%. The only glimmer of hope is a very slight upward revision to last months numbers. GBP did drop a few points initially but very quickly shrugged off the data and is now higher than pre-release levels. GBPSUD currently 1.2430, GBPEUR 1.1675.
Another disappointing night for English teams in Europe with Liverpool and West Ham both out of the Europa league. This is the first time for a few seasons that England have not had a team in the semi-finals of either the Champions League or Europa league. Aston Villa did scrape through their quarter final of the Europa conference, beating Lille on penalties. Good, we could do with them concentrating on Europe and ignoring the premier league!
FA cup semi-finals this weekend, Man City v Chelsea Saturday, Coventry v Man Utd Sunday. Always difficult to bet against Man City but Chelsea at 4-1 might not be a bad shout. We also have the Chinese grand prix to enjoy although looking at the forecast we could be in for some drier days over the weekend so might be better to get out and about.
Not much on todays calendar to upset the markets although we do have any developments in the Middle East conflict to contend with. Barring any further retaliations there, I’m wondering whether we could be in for a quiet day. Famous last words perhaps!
Have a great weekend
- 15.15 BoEs Ramsden speaks
- 15.30 Feds Goolsbee speaks