reports
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Pushing forward into de-escalation trades
Markets are increasingly pre-empting a positive outcome as the US and Iran prepare for a new round of talks. We still think caution is warranted and the balance of risks for the dollar now looks tilted to the upside. Central bank speakers remain in focus today, while we see some downside risks for Australian jobs numbers overnight
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Plenty of optimism priced in
The rebound in the dollar proved very short-lived. Markets remain keen to jump into the de-escalation trade, and some tentative signs that the US Hormuz blockade is leading to a new round of talks were enough to add plenty of pressure on USD. From here, we'll need to see clearer progress towards a permanent ceasefire to take DXY back to pre-war levels
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Failed peace talks give the dollar a brief lift
That US-Iran peace talks failed to deliver a sustainable ceasefire should perhaps not come as a surprise. And while a US naval blockade will push oil higher, that is a better outcome for the global economy than a renewed assault on energy infrastructure in the region. We doubt the dollar needs to rally too much further. Elsewhere, all eyes are on Hungary
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: First inflation test
Today, we'll find out how much US inflation jumped in March. We expect almost one percentage point, to 3.4%, in line with consensus. Core should only rise modestly, and the Fed may not give too much weight to the headline figure for now. Still, it might make it a bit harder to add bearish USD bets today, barring encouraging developments on peace talks and Hormuz
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Volatile truce
The dollar has found some firmer ground after Iran said the ceasefire had been violated yesterday. Fresh positive headlines on peace negotiations and Hormuz reopening should still asymmetrically favour high-beta/EM currencies, but euro gains may prove more sustainable as ECB pricing could prove sticky around 50bp of hikes
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Global FX comes back from the brink
News of a two-week ceasefire in Iran has seen a sharp recovery in risk across all asset classes. Higher equities, bullish steepening of yield curves, and a broad recovery in currencies against the dollar look to be the short- term trend as investors assess whether this ceasefire can lead to more sustainable peace
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Little reason to leave the dollar just yet
The dollar remains in demand as investors await the next chapter in the Middle East. Elevated energy prices are continuing to help the dollar, as is a seemingly robust US economy. Beyond second-tier US data today, the focus will be on whether any ceasefire can be agreed and whether energy prices can avoid another large leg higher
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Back to escalation
We have seen the first part of the de-escalation trade in FX. The second – another USD leg lower – requires greater clarity on Strait of Hormuz reopening plans, which currently appear distant after the headlines overnight. A new wave of escalation is now driving EUR/USD down again. Any downside surprise in tomorrow's US data could support more Fed repricing
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: ECB hawks can make euro a winner in de-escalation trade
The dollar has taken a hit on a new de-escalation trade. President Trump has now signalled that the war will end in two to three weeks, but plans for the reopening of the Strait of Hormuz remain quite unclear. EUR front-end rates are catching up with the downside today, but hawkish ECB comments can make them stickier and make the euro emerge as an outperformer
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Searching for the off-ramp
Equities have found support in a report that the US may be willing to end its military activities in Iran even if it leaves the Strait of Hormuz closed. That will be scant solace for the global economy unless a pathway to lower energy prices becomes clearer. With US light crude now over $100/bl, we could hear more conciliatory US talk and the $ could soften
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Dollar in demand; others left to hike, intervene, tighten co...
The weekend delivered no off-ramp to the crisis in the Middle East and the market remains braced for potential escalation. The dollar remains in demand, with US trading partners left to consider rate hikes, intervention or regulatory measures to protect their currencies. Unless this week's US labour market data surprises on the downside, $ will stay bid
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Just another ‘anti-decay' Friday
Normally, in the FX options world, the value of an option declines ahead of a weekend due to time decay on the view that nothing happens. This March, however, FX options prices have been rising into the weekend in an 'anti-decay' move as traders brace for weekend event risk. Expect the same today, given little clarity on escalation versus ceasefire
- Francesco Pesole
Norges Bank is ready to hike rates
Norway's central bank has signalled a hike is coming soon. Its inflation concerns are broad-based, not just limited to the energy price shock, and we now expect a hike in May – although timing depends on war developments. With 60bp priced in this year, we think this is the peak for front-end NOK rates, but our baseline EUR/NOK profile remains downward sloping
- Chris Turner
- Francesco Pesole
FX Daily: USD needs a spark for the next leg lower
Risk sentiment has improved, but oil prices sticking above $100/bbl are keeping USD afloat. Markets may well require some more convincing headlines on de-escalation to take the dollar meaningfully lower from here. In Norway, we expect a rate hold this morning, but a hawkish shift seems likely
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Central bankers need to talk tough
Energy prices, risk assets and FX markets continue to bounce around on the latest headlines out of the Gulf. It seems dangerous to position for an early resolution of the crisis, with the Iranians likely to want to take high energy prices as leverage in any negotiations. We have several central bank speakers in Europe today – very likely to sound hawkish
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Headline-driven trading continues
The dollar continues to be bounced around by the latest headlines on the war in the Middle East. Traders will be eager to hear, particularly from the Iranian side, whether there is any realistic chance of ceasefire negotiations getting started. Until then, any further rally in risk assets and sell-off in the dollar will prove limited
- Chris Turner
- Francesco Pesole
FX Daily: Sell-everything environment favours the dollar
Risk sentiment is deteriorating at the start of this week as the US and Iran appear far from peace discussions. Bonds and precious metals are following equities lower – an environment that heavily favours the dollar. Alongside Gulf developments, we'll watch central bankers' comments closely this week as a test of the recent hawkish repricing
- Francesco Pesole
- Chris Turner
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Hawkish hangover
Powell's mildly hawkish hints on Wednesday were dwarfed yesterday by reports the ECB is considering a hike in April and the most dovish BoE member is openly discussing monetary tightening. The dollar is suffering on the back of surprising overseas hawkishness, but also from some tentative optimism in energy markets
- Francesco Pesole
- Frantisek Taborsky
FX Daily: Central bank ‘ducking' to leave oil in the driver's seat
The Fed failed to offer any real guidance to the market, setting the script for other central banks to follow today. The result is that oil prices can stay firmly in the driver's seat. Still, in the case of the ECB and Bank of England, the very large hawkish repricing of the past few weeks raises risks of dovish surprises and negative currency impact
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