Iran deadline nears

Good morning

Welcome back after the long weekend.  I hope you missed the strong winds and instead enjoyed the blue skies we had for much of time.  It was mostly sunny if a little on the chilly side, that may change over the next couple of days as temperatures are due to rise to the mid-20’s if we’re lucky.  Those heady temperatures are only here for a couple of days mind you so do our best to make the most of it.

Congratulations to Man City, Chelsea, Southampton and Leeds for making it through to the FA cup semi-finals.  Southampton, now in the Championship, knocked out premier league high flyers Arsenal, who are now left with ‘just’ the domestic league title and champions league trophy to aim for.  They have to win something, surely?  

Friday saw a very strong set of US nonfarm payroll data, with headline at 178K from an expected +60k, and an unemployment rate of 4.3%, down from 4.4%.  Still, average hourly earnings were lower than expected and the previous headline was revised lower.  Market impact was surprisingly muted, perhaps those downside revisions limited the influence of the data, USD did push a few points higher but as I type GBPUSD and EURUSD are pretty much back to pre-release levels, at 1.3235 and 1.1545 respectively.

USDJPY has been up to 159.90 in the early hours of this morning.  I see the Japan FinMin has tried a bit more verbal intervention, this time mentioning potential coordination with G7 to combat volatility that she acknowledges is driven in part by Middle East tensions. I’m still quite surprised how Yen has lost its safe-haven status, not that long ago investors would flood to Yen in times of crisis. 

Of course, tensions in Iran and the surrounding areas are driving sentiment and there are real concerns of lower global growth, inflation led by higher energy prices and higher interest rates, not a great combination.  Trumps deadline for a deal with Iran ends at 1am UK time and I’ve seen little to suggest we could see some sort of peace.  Trump is keeping up his ‘we can demolish Iran in one night if we want to’ tone, but deep down he will surely be bitterly disappointed Iran haven’t backed down.  Escalation, rather than de-escalation, seems most likely unfortunately.  The only glimmer of possible good news was the rescue of the two US airmen who were shot down over Iranian territory.  I’ve not read too much of it as yet but it did sound pretty daring, no doubt we’ll have a film about that in a year or two.

In other news, the crew of Artemis II orbited around the far side of the moon, in doing so travelled further than any humans have ever done before and in doing so saw the far side of the moon, again something never before seen with human eyes although of course satellites have send pictures back in the past.  Pretty amazing stuff although I’m already looking forward to Artemis IV which should be the next moon landing mission some time on 2028 if all goes to plan.

It’s a limited economic calendar today.  We will have the latest RBNZ interest rate decision in the early hours of tomorrow morning, no change is expected but it will be interesting to see what guidance they offer, particularly in respect of possible energy-driven inflation, at the press conference.  RBI rate announcement follows, a little later, I don’t always put that on the calendar but after the RBI action last week I thought its worth highlighting.

The rest of the week brings EU retail sales but the main events, Middle East aside, will surely be US core PCE on Thursday and US CPI inflation Friday.

Arsenal try to put their FA cup defeat behind them as they take on Sporting in the first leg of the Champions League quarter finals this evening.  We’ll also be treated to Real Madrid v Bayern Munich.  Tomorrow we’ll have Barcelona v Atletico Madrid and PSG v Liverpool, the latter having been dumped out of the FA cup at the weekend by a ram[ant Man City.  Could be some great matches among those.

Have a great day…

-  13.15 US ADP employment 4 week average

-  13.30 US durable goods

-  15.00 CAD Ivey PMI

-  17.35 Feds Goolsbee speaks

-  22.50 Feds Jefferson speaks

-  03.00 RBNZ rate announcement

-  04.00 RBNZ press conference

-  05.30 RBI rate announcement