Uneasy calm on continued hopes for peace in the Middle East

Good morning

Yesterday was generally calm in the financial markets, a day of little data.  Equities were more mixed with US markets making small gains but Asian markets ended the week with a down day.  Futures prices points to an uncertain open in Europe.  The US dollar is a touch stronger across the board, GBPUSD currently 1.3510, EURUSD 1.1775 which puts GBPEUR a touch lower at 1.1470.  A recent poll of economists suggests ECB may be forced to make one 25bps rate rise in June. 

USDJPY has lifted with the stronger US dollar, now 159.50, unsurprisingly drawing defensive comments from Japan officials who are quick to point out that other currencies have also weakened against USD over the past day or so.  Some attention on whether BoJ will raise rates at their meeting later this month to address the weak Yen, but with BoJs Ueda highlighting the Middle East crisis is weighing on the Japanese economy, a rate rise could be unlikely.

US rates are also in focus, with Feds Miran insisting there is no clear reason for delaying rate cuts although it seems the market disagrees, with forecasts for any cuts being pushed back until later this year, while some major banks are saying any cut in 2026 is unlikely. 

Australia’s Treasurer Jim Chalmers has warned of war-led inflation risks prompting forecasters to consider a rate rise early next month, his comments coming on the back of a very high inflation reading earlier this week.  AUDUSD failed to breach that 0.7200 area and is now 0.7165, AUDNZD holds near recent highs at 1.2180 and GBPAUD is around 1.8850, its lowest level for about a month. 

Eyes of course on the ceasefire in Iran and whether any lasting peace deal can be agreed.  Trump seems certain that an agreement will be found, also pleased with Israel’s ceasefire with Lebanon.  In typical Trump style, he applauded himself with now having put an end to ten wars, without making it clear exactly which wars he has ended.   Regardless, the is optimism a deal can be struck in the coming days although I think it is fair to say that whatever the outcome, the global energy markets will take a very long time to recover and indeed may never return to what we considered as  ‘normal’. 

In sport, Aston Villa, Notts Forest and Crystal Palace all progressed to their respective semi-finals.  Villa will play Forest meaning there will certainly be one English club in the Europa league final and there is even an outside possibility that Forest, should they win, could be in the Champions League next year while playing in the Championship should they get relegated.  Not sure anyone has managed that before although Spurs did their best last season.    

We have a pretty vital weekend of premier league action with important matches at both ends of the table.  At the bottom, Spurs, desperate for points, have their work cut out against Brighton, Leeds will hope to pretty much ensure league safety if they win against Wolves, while Forest will be looking for points as they take on struggling Burnley.  If Leeds and Wolves win, Spurs could be in real trouble.  At the other end of the table, Chelsea take on Man Utd, Everton and Liverpool meet in the Merseyside derby, but the main event has to be Man City v Arsenal, not quite a title decider but not far off.  

It’s a limited calendar today but things liven up next week with inflation, unemployment and retail sales from the UK, US retail sales, Canadian and NZ CPI plus EU, UK and US PMI’s.  Plenty to keep us busy and that’s before we have any news from the Middle East. 

Have a great day, and a great weekend as and when it comes…

-  10.00 BoEs Breeden speaks

-  17.30 Feds Daly speaks

-  19.00 Feds Waller speaks