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