Possible Iran deal sends oil prices lower

Good morning

Welcome back after the long weekend.  Its been an absolute scorcher here, temperatures well above 30°c.  I know lots of places have been warm and sunny over the bank holiday but it seems we’ve had it hotter than many.    Could be as high as 33°c here today and then looks like it will cool down a little. 

Main event over the weekend of course is that Spurs managed to survive the threat of relegation with a slender 1-0 win over Everton which kept them in 17^th place, just above the relegation zone.  A valiant 3-0 for West Ham wasn’t enough to keep them in the Premier League, they’ll be in the Championship next year.  Credit to Sunderland who came up last season and made it to the Europa league places.  Chelsea had a woeful end to the season, finishing in tenth place.  Arsenal were the only London club in the top eight. 

Over the weekend we got some differing opinions on the potential for a peace deal in Iran.  At one stage it seemed as though a deal would be struck, oil prices duly plummeted, equity futures rallied and the US dollar dropped.  News of US strikes on Iranian boats and missile sites suggests a peace deal is far from close but markets still seems to hold out hope for an agreement.  The suggestion is the attacks were limited in nature and don’t point to a move away from the ceasefire that has been in place since early April.  An agreement seems to hinge around the treatment of Iran’s enriched uranium. 

Brent crude is currently $96.40, WTI at $92.60, off their lows but still well below levels seen last week around $112.50 and $105 respectively.  European equites are generally lower this morning expect UKs FTSE which is currently up nearly 1%, helped in no small part by lower gilt yields this morning.  GBPUSD saw a high of 1.3510 yesterday, its back to 1.3475 as I type.  GBPEUR managed to briefly regain 1.1600 yesterday, its highest level for two months after a pretty volatile May which saw a low in the mid-1.14’s.  EURUSD is 1.1635, plenty of talk about a 25bps rate rise at the next ECB meeting.   

Not a great deal on the economic calendar today, mo9st of the action will be overnight when we’ll have the latest Aussie inflation numbers and the latest interest rate decision from RBNZ.  They are widely expected to keep rates unchanged at 2.25% but I wouldn’t be at all surprised if they strike a mildly hawkish tone given Breman’s previous comments that RBNZ would take decisive action if core inflation were to pick up.  GBPNZD is 2.3050, AUDNZD 1.2250.

Another case of politicians doing absurd things that are unbelievably stupid came to light over the weekend as for Scottish National Party chief executive Peter Murrell admitted embezzling some £400,000 of party funds.  His wife at the time, Nicola Sturgeon, former First Minister of Scotland, has insisted she had no idea Murrell was stealing money from the party to pay for luxury goods.  OK, so maybe if it was just a watch or a pen he bought perhaps it could be kept secret, but he bought, among other things, a couple of cars and a £125,000 motorhome.  How can she not have noticed that sitting on the driveway?

Looking ahead this week, the main event will certainly be US GDP and core PCE on Thursday, we do have Japan Tokyo CPI and German HICP later in the week but I wouldn’t be surprised to see these come and go with little fuss.  Several central bank officials speaking this week, watch for any more hawkish talk from ECB members.  Feds Warsh has been officially sworn in as Fed chair to replace Powell.  Warsh, who we think would really like lower rates, is arriving at a tough time as many Fed officials are sounding more hawkish.  

Have a great day…

-  14.00 US housing starts

-  14.00 ECBs Sleijpen speaks

-  15.00 US consumer confidence

-  01.00 BoJs Ueda speaks

-  02.30 AUS CPI

-  03.00 RBNZ rate announcement

-  04.00 RBNZ press conference