Markets remain hopeful of peace in the Middle East

Good morning

Another day, another decent set of moves up in global equities as oil prices and the US dollar drop.  GBPUSD saw a high of 1.3590 yesterday, EURUSD got above 1.1800 and even USDJPY managed to lose a few points, slipping to a low around 158.60 at one stage in the afternoon.  USD is just off those lows for the time being and although European equities are a little mixed this morning there is still a strong, hopefully not misplaced belief that there will be a positive outcome in the Middle East.

Oil prices had dipped sharply overnight. WTI traded down to $87 briefly on suggestions that Trump had told a Fox reporter the war in Iran was over but the move quickly reversed as Trump’s words were revealed to be ‘very close to over’.  That interview is, I believe, due to be aired at 11am this morning UK time in which Trump insists Iran want to strike a deal.  Elsewhere China is reported to be in talks to purchase Russian oil as their Iranian supplies dry up.    

GBP made small gains against EUR as well, another move I find odd given the IMF have said that UK growth will be hit hardest by the Iran war compared to other major economies, with 2026 growth forecasts lowered 0.5% from those made in January to just 0.8%.   With UK also forecast to have the joint highest inflation numbers in the G7 through 2026 and 2027 there is less chance of UK rate cuts this year, perhaps the interest rate differential between ECB and BoE will start to impact currency levels. 

On the whole though, central bankers at the IMF meeting suggested a cautious rather than hawkish approach to Iran-led inflation.  Plenty of officials speaking again today including BoEs Bailey and ECBs Lagarde.  Aussie data overnight likely to be closely watched, inflation was higher last month while headline Aussie employment looked good but details showed weakness in full-time jobs. 

In sport, Liverpool were dumped out of the Champions League by PSG whose 2-0 win gave them a solid 4-0 win on aggregate.  Barcelona put up a better effort against Atletico Madrid, coming back from a two goal deficit in the first leg to equal things up before Atletico scored what proved to be the winning goal.  Quite why the English commentators had to use the term ‘Atleti’ when talking about Atletico is beyond me.  OK I know it’s a local term but it just didn’t sound right.  Sort of like having to try to say ‘Turkiye’ instead of ‘Turkey’.

This evening sees England’s remaining hope Arsenal take on Sporting, Arsenal have a 1-0 lead from the first leg and will be hoping to put their defeat to Bournemouth behind them and do enough to proceed to the semi-finals.  In the remaining match, Bayern Munich take on Real Madrid knowing a draw would be enough to take them through.  That could be a cracker.

Have a great day…

-  10.00 EU industrial production

-  13.30 US NY empire state manufacturing

-  13.30 Feds Barr speaks

-  16.20 ECBs Cipollone speaks

-  16.50 BoEs Bailey speaks

-  18.00 ECBs Escriva, RBNZs Breman speak

-  18.45 Feds Bowman speaks

-  19.00 BoEs Bailey speaks

-  19.00 Feds Beige book

-  19.00 ECBs Cipollone speaks

-  20.30 ECBs Lagarde speaks

-  21.00 ECBs Schnabel speaks

-  02.00 AUS consumer inflation expectations

-  02.30 AUS unemployment

-  03.00 China GDP

-  07.00 UK GDP, industrial production