Markets remain optimistic as peace talks start

Good morning

Softer US data kept the US dollar on the back foot yesterday but of course most attention remains on the Middle East and the fragile ceasefire that still seems to mean different things to the various countries involved.  Peace talks begin in Pakistan today, the US will push hard for some sort of deal, particularly to reopen the Strait of Hormuz and failure to find any agreement could well see hostilities restart.  Meanwhile Trump’s anger with NATO continues as he looks to punish allies who he thinks are not helping enough, while also threatening once again to take control of Greenland.

The financial markets are overlooking much of the uncertainty on the ceasefire with equity markets holding recent gains and the US dollar still at the lower end of recent ranges against other majors.  GBPUSD and EURUSD are currently 1.3425 and 1.1685, around 60 and 40 pips off the highs respectively but still at elevated levels compared to pre-ceasefire levels.  Yen bucks the weak dollar trend though, USDJPY now back into the 159’s prompting more jawboning from Japan officials in an attempt to slow yen depreciation.  GBPJPY is within a few points of 214, its highest levels since early Feb when we saw 215, in turn the highest levels since 2008.

I see the White House has warned government officials from placing bets on prediction websites after reports of several huge stakes were placed just ahead of the ceasefire announcement.  There has also been reports of massive trades in oil markets ahead of various announcements leading to speculation that some close to Trump have been enriching themselves with insider knowledge.  There seems to be a lot of insider trading in the US, it is common knowledge that a few Senators have made ridiculously well-times stock purchases ahead of major announcements and contract awards. 

US CPI inflation numbers are out today and they are expected to show a large jump due to higher energy prices, with forecasters looking for a monthly rise around 0.9% which would be the largest monthly rise since 2022, and a year on year headline figure of 3.3% from 2.4% last month.  Core CPI, that is without food or energy, is still expected to rise although at a much lower rate.

Hungarian elections take place this weekend and if polls are to be believed it is quite possible the current PM, Orban, could lose his place after 16 years in charge.  Orban is known for his pro-Russia views and the EU would be happy to see the back of him.  His main opponent, Peter Magyar, has promised closer relationships with the EU at the expense of Russia although will still be keen to keep dialogue open with Putin.  It will be interesting to see the results next week.  I presume if Orban wins again there will be plenty of talk of vote-rigging and perhaps Russian interference.

In sport, apologies for my champions league slip-up yesterday, I wrongly said Arsenal could meet Bayern in the semi’s when in fact they will play either Barcelona or Atletico Madrid, assuming of course Arsenal beat Sporting next week.  I also failed to mention Notts Forest and Aston Villa who played in the Europa League quarter finals last night, and Crystal Palace who appeared in the Europa conference league.  Villa and Palace enjoyed good wins, while Forest drew to Porto, helped by a 45-yard own goal by a Porto defender.

Premier League action returns this weekend, Spurs, under another new manager, will hope for much-needed points against Sunderland while also hoping fellow league strugglers fail to earn points.  Arsenal will hope to extend their lead at the top against Bournemouth tomorrow, they will also be hoping Chelsea can derail any Man City recovery on Sunday.

In golf, the US Masters is underway at Augusta with last years winner McIlroy joint top of the leaderboard at five under.  Justin Rose, who lost to McIlroy in a play-off last year, is just three shots behind the leaders on 2 under. 

Next week is light on data, US PPI could be the highlight, Aussie employment data a close second.  We will hear from BoEs Bailey a couple of times which could be interesting given his recent comments that the Middle East conflict could trigger a 2008-style financial crisis. 

Have a great day, and a great weekend as and when it comes.  Sunday is looking good, a bit of rain so we need to stay indoors, Spurs at 2pm, Chelsea v Man City at 4.30pm and the Masters to round things off, what could be better?

-  11.00 ECBs de Guindos speaks

-  13.30 US CPI

-  13.30 CAD employment

-  15.00 US Michigan sentiment survey

-  19.00 US monthly budget statement