Oil up, sentiment down as US/Iran continue to exchange gunfire

Good morning

Another day, more of the same.  USD a bit higher but still within recent ranges, GBPUSD 1.3355, EURUSD 1.1385, the latter just 60 pips or so off the lows seen back in June which in turn were the lowest levels the pair has been since May 2025.  GBPEUR 1.1730, pretty much where it was this time yesterday morning.  USDJPY is 162.35, hardly moved on talk of possible GPIF asset allocation changes which could see a move to domestic assets, with GBPJPY just around the 217 area.  The general USD strength could be put down to Feds Waller who said if inflation continues to come in hot the Fed will have to consider raising rates, a safer move now US employment is looking strong.  A timely comment given the US CPI inflation is out this afternoon.

The situation in Iran is looking worrying as both sides continue to trade shots and Trump reinstates the blockade of Iranian ports. The optimists are beginning to wonder whether they really should be thinking that peace is just around the corner.  Oil prices are back into the $80’s, still a long way from the highs when the war broke out but nevertheless some 20% off the lows seen at the start of July when peace looked far more certain. 

Elsewhere, China trade data showed a hefty surplus of some $125bn, the second highest ever, helped by a 27% jump in exports.  What a great position to be in for the Chinese!  USDCNY is 6.7800, probably not reflecting the true level of CNY but still at levels not seen since 2023 which will maybe go some way to appease Trump who hates the idea of China earning so much while CNY remains weak. 

RBNZs Conway warned of sticky inflation which has helped NZD continue the general push higher we’ve seen through July so far as expectations of higher interest rates through 2026 continue.  Whether those forecasts of two further 25bps rises play out remain to be seen, several banks are suggesting they see perhaps just one more raise this year, a lot perhaps depends on Iran and the impact on global economies, and whether inflation remains energy-price driven.  AUDNZD is down to 1.1965, the lowest we’ve seen since March, while GBPNZD is down at 2.3050 from a high just one week ago of around 2.3535.   

I received an email from Affinity Water saying there will be a hosepipe ban coming in this Friday.  No major surprise given the high temperatures and lack of rain we’ve had for a while now.  Temperatures are forecast to stay in the high 20’s until the end of this month with hardly any rain and I suspect if we do get rain it will be heavy and quick.  The grass is already brown so I can’t worry about that but the sunflowers that my wife has carefully tended will suffer unless we resort to water-saving methods.  I’m not so worried about the grass, if it doesn’t grow there is less to cut, although I’ve been surprised how much has come off when I’ve mowed it each week recently.

Today brings US CPI inflation, a key release in light of Waller’s comments and anything around 4% for headline of 3% for core could be enough for the market to see Fed rates higher.  Several Fed officials are speaking today ahead of the blackout period that comes this weekend, Warsh is one of those speaking.  BoEs Bailey is also on the calendar.

I’m now of the office for a few days after today so I’ve added in the main calendar events below.  I’ll be back early next week by which time we’ll know not only if England have beaten Argentina in the world cup semi-finals but also whether we’ve ended 60 years of hurt and brought the trophy home.  My fingers are well and truly crossed.  France take on Spain this evening, hoping really for a surprise Spain win as I would not fancy our chances of beating a strong France team.

Finally, for the space watchers among you, cast your eyes to the night skies on 17^th July and you may be lucky enough to see six planets all in a line with Mercury, the brightest, at the bottom.   

Have a great few days, back early next week. 

-  09.45 BoEs Bailey speaks

-  13.30 US CPI

-  15.00 Feds Warsh speaks

-  17.40 Feds Barr speaks

-  18.00 Feds Goolsbee speaks

-  18.30 Feds Cook speaks

-  19.55 Feds Bowman speaks

-  21.00 BoEs Bailey speaks

-  03.00 China GDP, retail sales, industrial production

Wednesday

-  13.30 US PPI

-  14.45 BoC rate announcement

-  15.00 Feds Warsh speaks

Thursday

-  02.00 AUS consumer inflation expectations

-  07.00 UK GDP, industrial production

-  13.30 US retail sales, initial jobless claims

Friday

-  10.00 EU HICP

-  15.00 US Michigan sentiment survey

US and Iran continue to fight it out

Good morning

Firstly, many apologies for a possible late delivery of Friday’s report.  Email issues at our service provider meant that while we received emails intermittently, sending emails was very delayed and random.  Hoping it’s all back to normal this morning.

I do hope you had a good weekend.  The weather was fantastic yet again although I did experience temperatures in the low 20’s as we ventured into Norfolk for a short visit on Saturday.  We have had little respite to the hot weather here, today promises to be the coolest day for a while at 27°c but we’ll be back into the 30’s tomorrow.  Some storms may arrive later in the week but I am lucky enough to have another short week as we jet off with our NZ visitors to Portugal for a few days in Porto and Lisbon, and a bit in between.  Believe it or not I have never been to Portugal so I am very much looking forward to getting away….again!

England footballers have made it to the semi-finals of the world cup having beaten a spirited Norway team in extra time.   England were good but not firing on all cylinders and I’m hoping we see a bit of improvement in the next match against Argentina on Wednesday evening, the winner will face either Spain or France, that match will be played tomorrow evening.     

England’ rugby players returned to winning ways with a dominant 73-8 win over Fiji.  Next up for England is actually Argentina on Saturday.  And England’s cricketers have beaten India 4-0 in the T20 series which puts them at the top of the ICC world rankings.  Next up is the three-match ODI series which begins tomorrow, India are top of the world rankings there, England a lowly 8th.   And congratulations to Sinner, means Wimbledon champion for the second year running, beating Zverev in four sets.

Anyway, so much sport and so little on the markets so far.  Well I am surprised equities are not more negative on the open this morning as news of ongoing military strikes between US and Iran continue.  So much for Trump’s idea that this will be quick and easy, that Iran will roll over or plead for peace.  Most Asian markets lost ground overnight and although European markets are generally lower I’d have expected larger losses.  Oil prices were up on the open but currently a dollar or so off the highs. 

In currencies, the US dollar opened a little firmer with GBPUSD and EURUSD seeing lows around 1.3370 and 1.1385 but both have since returned to Friday’s closing levels, still below last Friday’s highs which saw the pairs reach 1.3450 and 1.1460.  GBPEUR has slipped from Fridays highs which came in around 1.1750, now 1.1725.  USDJPY took advantage of the stronger US dollar reaching 162.35 earlier this morning, GBPJPY is currently just a few points above 217 as I type. 

Here in the UK we have one week left before Andy Burnham becomes Prime Minister.  I feared life under Starmer, and I fear that life under Burnham will be even harder, particularly for those slightly better off who are highly likely to face higher taxes in order to fund Burnham’s spending spree.  At some point we’ll see what Burnham’s cabinet looks like, plenty of speculation until then as to who will take the major roles alongside the new Labour leader.

Little on the calendar today other than central bank officials.  Could be interesting to hear why RBNZ’s economist Conway has to say following last week’s rate rise from RBNZ.  Markets are pricing a further 50bps of rate rises this year although there are a few major banks that think one more rise is more likely.  As with other central banks, so much depends on when, or if, we see a resolution to the Iran war and what such an agreement would actually look like.

US CPI tomorrow is the highlight of the week’s calendar.  Equities guys will be watching the raft of results due to be released as we get into Q2 reporting season.  Fed’s Warsh will be testifying to the House Financial Services Committee on Wednesday.  There is an FOMC meeting at the end of this month, the blackout period will begin this coming Saturday so expect a few Fed officials to offer their thoughts ahead of that.

Have a great day…

-  10.25 Feds Bowman speaks

-  17.30 Feds Waller speaks

-  17.45 ECBs Schnabel speaks

-  19.00 BoEs Pill speaks

-  19.00 US monthly budget statement

-  23.00 NZ business confidence

-  23.00 RBNZs Conway speaks

-  00.01 UK BRC retail sales

-  01.30 AUS consumer confidence

-  04.00 China trade balance

USD down, equities up despite ongoing US/Iran hostilities

Good morning

We’ve seen a bit of USD weakness filter into the markets as we near the end of the week.  GBPUSD and EURUSD are currently 1.3425 and 1.1440 respectively which puts GBPEUR at 1.1740, another high since June last year.  Perhaps BoE’s Pill’s comments that we’ll need a rate rise in the UK is helping give GBP a small boost.

USDJPY took advantage of the weaker US dollar, trading from 162.40 to 161.30 overnight as Japan FinMin Katayama talked of encouraging Japan pension funds to invest in domestic assets.  The idea of repatriation of Japan’s overseas assets gave Yen a bit of a boost but we are a long way from seeing anything that would turn the tide of Yen depreciation.  GBPJPY traded down from yesterdays highs around 218 to just below 217, as I type USDJPY has recovered a little to 161.70, dragging GBPJPY back above 217.

Equity markets continue to shrug off the latest US/Iran hostilities, still preferring to focus on the reports that US and Iran are still negotiating the peace deal, although from where I sit and such deal would be so incredibly fragile.  US and Asian markets were generally higher yesterday, European stocks seem to be opening on a positive footing this morning.  Oil prices remain above last week’s lows but still in the low to mid $70’s, some $50 off April’s highs. 

In the UK, Andy Burnham has been backed by 322 Labour MP’s to replace Starmer as the next Labour leader and therefore become the next UK PM.  Burnham is currently unopposed in the leadership contest, if this remains the same he’ll be confirmed as leader next week and will take office as Prime Minister on 20^th July.  In other political news, Ann Widdecombe has passed away at the age of 78.  She was a no-nonsense straight-talking MP who not everyone agreed with, even in her own party, but was certainly a character, the likes of which we don’t see very often in politics these days.

In sport, England cricketers have won the T20 series against India with an unassailable 3-0 lead in the five match series.  Meanwhile in tennis British hopes are on Arthur Fery who will play his semi-final match at Wimbledon this afternoon against Alexander Zverev, seeded second in the tournament.  The winner will face a tough test against either top-seed Sinner or the incredible Djokovic.

In rugby, the Nations championship continues this weekend.  England, after their battering by South Africa last week, take on Fiji tomorrow afternoon. Scotland face South Africa, but Japan v Ireland could be one of the more interesting matches.  Rugby fans who don’t like the sun could stay indoors and watch all six matches from 06:10 tomorrow morning to 20:10 tomorrow evening.

Of course, the main event in the football world cup which has seen France topple Morocco for a place in the semi-finals.  In the remaining quarter finals, Spain play Belgium this evening, England take on Norway on Saturday and Argentina play Switzerland on Sunday.   France remain tournament favourites although it’s little surprise given they are already through to the next round.  Argentina, Spain and England are all favourites to win their respective matches for a place in the semi-finals.  The England kick-off is at 10pm, a far more reasonable time than the previous match which kicked off at 2am. 

A light calendar today with just Canadian employment this afternoon.  Next week’s major economic releases come in the form of CPI inflation and retail sales from the US, as well as the latest BoC rate announcement.  Other data out next week includes China trade and GDP, and UK’s monthly GDP and industrial production.  

Its looking like another scorching weekend with temperatures in the 30’s and will remain around there into next week although I see thunderstorms are forecast for this time next week.  We could do with a bit of rain, that’s for sure!

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

-  13.30 CAD employment