Today there are no significant data releases on the calendar, although the President of the ECB, Christine Lagarde, will speak. Tonight China decided on interest rates and kept them unchanged.
More will happen later in the week; we will learn, among other things, about domestic activity data for March, which we believe will be fairly strong readings. Energy Minister Miłosz Motyka said that the government does not currently plan to phase out fuel price support, but a drop in wholesale prices to pre-war levels could push it to do so.
According to the minister, the phasing out of support will proceed gradually. On Friday there was a temporary resumption of ship traffic through the Strait of Hormuz, but on Saturday it was blocked again by Iran. The opening of the strait was announced on Friday by Donald Trump, and the information was confirmed by Iran.
This caused a sudden rise in optimism in global markets, including strong gains on the exchanges and a discount in the oil market. The US President also stated that the American blockade of Iranian ports remains in place, but negotiations with Iran are proceeding successfully.
Trump repeated threats to destroy Iranian bridges and power plants
The resumption of traffic was to last from the end of the ceasefire between the US and Iran, i.e. until Tuesday evening, but Iranian authorities announced a new blockade and strict army control on Saturday. According to the Iranian side, the re‑closure of the strait was a response to the US maintaining the blockade of Iranian ports. On Saturday, after Iran resumed the blockade of the Strait of Hormuz, Donald Trump announced that another round of peace talks would take place in Pakistan on Monday.
Trump also repeated threats to destroy Iranian bridges and power plants if Iran does not accept the US peace proposal. However, it is not certain whether the talks will take place, because, as the Iranian news agency Tasnim reported, on Sunday Iran had not yet decided whether it would participate.
Uncertainty is also increased by the US seizure of an Iranian cargo ship, which Donald Trump announced on Sunday. According to Reuters, Iran announced retaliation for the seizure of the ship.
On Friday the zloty strengthened, aided by growing hopes for a resolution of the Middle East conflict, reinforced by the information about the opening of the Strait of Hormuz.
EURPLN started the session at 4.24, and by the end it struggled at 4.225. Other regional currencies behaved similarly. EURHUF opened the day at 364, temporarily fell below 360 during the day, then returned to around 361.50.
The dollar weakened against the euro
EURCZK fell from 24.32 at the start of the day to 24.25 by the end. Thanks to market optimism, the dollar weakened against the euro and EURUSD rose from 1.179 at the start of the day to 1.182 by the end of the European session. Nevertheless, Friday evening brought a correction of most of these moves, and Monday’s opening continued it. Currently EURPLN is at 4.23, and EURUSD at 1.175.
Friday optimism led to a sharp drop in bond market rates. Yields fell by about 15 basis points, roughly similarly on the long and short ends. The base markets behaved similarly, with declines of 8-10 basis points. IRS rates fell by about 10 basis points, which translated into a narrowing of the asset swap spread by about 5 basis points, in the case of a 10‑year term below 90 basis points.
FRA rates also fell, including distant terms by up to 13 basis points. In today’s session one can expect at least a partial reversal of the rate decline, in response to the renewed blockade of the Strait of Hormuz.
