Markets bounce on news US/Iran peace deal to be signed Friday

Good morning

Welcome back after what I hope was a terrific weekend.  We had some lovely weather which meant I spent plenty of time topping up my vitamin D levels, a lot of work in the garden after the recent rain helped the grass grow almost right in front of my eyes.  Have to say I’m aching a bit today.  I’ve not caught much of the world cup so far, the match timings haven’t been great but if I’m honest I haven’t yet got particularly excited about the whole thing.  Perhaps that’ll change this week when England play their first match.. 

Still, the Evans household is represented at the world cup this year, my eldest is out in Dallas hoping to catch the England group games although tickets are expensive and difficult to come by,  Mind you, he and his three friends have a fantastic road trip ahead, travelling from Dallas to New York via various US cities so even if they don’t get to any matches they’ll have a superb holiday anyway.  Meanwhile, I’ll just carry on here…

So, the big news over the weekend is that US and Iran have worked out the basis of a peace deal which will apparently be signed in Switzerland on Friday and will see the Strait of Hormuz reopening.  Oil prices have slumped, Brent is now $83.25, WTI $80.25, both down from last week’s highs which came in around $95.50 and $93.65 respectively.  Don’t get too excited though, prices at the pumps are unlikely to drop quickly as bottlenecks in Hormuz and supply in general are likely to have significant impact for some time/  Equities are enjoying the thought of peace, in Asian the Nikkei led the way, rising some 5%, European markets are expected to rise again today after a strong performance Friday. 

In currencies, the US dollar has weakened but moves have been limited.  GBPUSD and EURUSD have seen highs of 1.3460 and 1.1620 this morning although both are currently 10-20 pips off those highs.  UDSJPY opened lower at 159.75 but has since crept back above the 160 area.  The likes of AUD and NZD which had been struggling have made up some ground although are still below recent highs against USD, while agaisnt GBP they are now around 1.9000 and 2.2975.

Iran are claiming a victory, suggesting billions of dollars in sanctioned funds will be released plus allegedly being promised some $300bn in reconstruction aid, while all US forces will move out of the area.  Trump denies this although really the money is one thing, the most important factor will be an agreement over Iran’s nuclear plans.  This could still remain a difficult issue and from what I read is not completely sorted out as yet.  Indeed, Iran suggest there is a 60 day negotiation period after the signing of the deal, so plenty still to be sorted out.  Israel are not pleased with the deal that they say gives them no comfort as they continue attacks on Hezbollah forces.

So no doubt that news of this peace deal will make the headlines this week but there is plenty going on aside from that.  We have several central bank rate announcements this week, the talk of peace could be a deciding factor in whether we see rate rises.  BoJ and RBA will meet overnight, BoJ are expected to raise rates 25bps to 1% despite Ueda missing the meeting having been taken into hospital last week, RBA are likely to keep rates unchanged.   

On Wednesday evening we’ll have Warsh’s first FOMC meeting as Fed chair, he’ll be pleased to see a peace deal as I’m sure he’ll use that to push for no rate change.  SNB and BoE are also expected to keep rates unchanged at their meetings Thursday, as always the voting pattern for BoE will be watched closely.  It’s a busy week for UK economic data with inflation, employment and retail sales numbers all being released, we’ll also get the latest US retail sales and NZ GDP data.

This Thursday we’ll have the Makerfield by-election which could see Andy Burnham, currently Mayor of Greater Manchester, return to Parliament as an MP from where he’ll undoubtedly challenge Starmer for the leadership of the Labour party.  As I type I see Starmer has banned under 16’s from a number of social media sites.  The ban will take effect from spring next year.   

It’s a bit chilly this morning but temperatures are forecast to rise to almost 30° later in the week and we could be lucky enough to see those high numbers last for a couple of weeks. 

Have a great day…

-  08.30 ECBs Lagarde speaks

-  08.50 ECBs Cipollone speaks

-  10.00 EU industrial production

-  13.30 US NY empire state manufacturing index

-  14.15 US industrial production

-  03.00 China retail sales, industrial production

-  03.00 BoJ rate announcement

-  05.30 RBA rate announcement

-  06.30 RBA press conference

-  07.30 BoJ press conference