Oil prices up as Trump signals extended Iran port blockade

Good morning

The US dollar made some ground yesterday, GBPUSD traded as low as 1.3465 and EURUSD around 1.1680 in the afternoon although by the London close we were back up at 1.3515 and 1.1715, leaving GBPEUR a little off recent highs at 1.1535, nothing from ECBs Lagarde to impact the markets yesterday.  USDJPY pushed as high as 159.80 but once again failed to extend gains beyond that area and slipped back to the mid-159’s.  This morning has brought little change, the USD is slightly higher with GBPUSD around 1.3500 and EURUSD 1.1700.  I see the Times shadow MPC voted 5-4 in favour of keeping rates unchanged, much closer than the market is expecting from BoE tomorrow.

AUD pushed a touch higher through the day, GBPAUD traded to 1.8800 while AUDNZD hit fresh highs since all the way back to 2013, finally breaching the 1.2200 level by a few pips having tested several times through April.  Aussie CPI came in higher as expected, no major surprise given the jump in fuel prices although worth noting CPI was a touch lower than feared.  Chances of a May rate rise have dropped a little, probably explaining why AUD is not stronger, with GBPAUD now 1.8850 and AUDUSD 0.7165, slightly softer than before the data.  AUDNZD dipped after the data but then rallied to yet another new high around 1.2230.  Still, a 25bps RBA rate rise in May and then again possibly in June, should keep AUD close to recent highs.

UAE leaves OPEC putting the oil cartel’s future in doubt.  UAE could well ramp up production, which in turn could see others raise production as well, although with the closure of the Strait of Hormuz this probably wouldn’t have much of an impact in the short term.  Oil prices have pushed back over $100, not really a surprise given the lack of any glimmer of a peace agreement with Iran and talk from Trump of an extended blockade of Iranian ports.   

In the UK, Starmer avoided an investigation into his misleading of Parliament over the Mandelson appointment, Labour members decided to vote with their party rather than with the opposition, after what was reported to be a huge campaign by Labour ministers to bring the backbenchers on side.  Meanwhile, King Charles has met Trump in Washington DC and given a speech at the White House where he talked of the historic relationship between US and UK, the importance of democracy and the importance of working with allies in such a ‘contested world’, speaking positively of NATO and similar friendly bodies.  There is a feeling Charles has gone a long way to rescue UK/US relations during his visit.

Yesterday evening football fans were treated to an incredible Champions League semi-final between PSG and Bayern Munich which saw PSG take a 5-4 lead into the second leg next week.  This evening brings Atletico Madrid v Arsenal, difficult to see this being a nine-goal thriller although Arsenal fans may be boosted by the thought that lowly Spurs managed to beat Atletico when they met earlier in the competition. 

Today brings German inflation, rarely a market mover, and then BoC rate announcement where they are expected to keep rates on hold at 2.25%  Later this evening we’ll have the FOMC rate announcement, possibly Powell’s last as Chair, where rate are expected to be held at 3.75%.  Despite the Iran crisis, recent US employment data has proved to be resilient which could lead to a mildly more hawkish tone from Powell. 

Have a great day…

-  10.00 EU consumer confidence

-  13.00 German HICP

-  13.30 US durable goods, housing starts, building permits

-  14.45 BoC rate announcement

-  15.30 BoC press conference

-  19.00 FOMC rate announcement

-  19.30 FOMC press conference

-  00.50 Japan retail trade

-  02.30 China manufacturing, non-manufacturing PMIs