Attention is drawn to the high activity of Pakistani diplomacy, which simultaneously tries to exert greater pressure on Iranian generals - the open question remains how the politicians from Islamabad are actually playing their cards, American or perhaps Chinese.
However, the markets are not much interested in this, more important are reports suggesting that the conflict in the Middle East is moving towards de-escalation - informally it is said that the 2‑week ceasefire will be extended, which expires on Wednesday, and the Iranians were supposed to propose that the movement through the Strait of Hormuz should run smoothly on its southern side.
Stock markets remain in "buy panic"
Stock markets remain in "buy panic" and this does not only apply to Wall Street indices (yesterday the S&P500 and Nasdaq100 recorded new highs), but also Asia (new ATH on the Nikkei225), which is a mix of quick closing of excess short positions from recent weeks (Trump had announced the destruction of civilization), but also excellent results of U.S. companies in Q1 (the publication season has just begun, but already more than 80% of companies reported better readings). Good sentiment prevails in metals, but copper is the biggest winner of the last two weeks (COMEX contract prices returned to 6.10 USD). Cryptocurrencies are trying to continue the rally, which in recent days have started to break out of a two‑month consolidation.
Against other assets, the currency market is struggling with volatility - little happens with EURUSD (we are circling around 1.18, although we had an unsuccessful approach to the key resistance at 1.1830).
It is worth mentioning the comments of EBC representatives, who are dampening market expectations of rapid rate hikes in response to inflation risks. On the FED topic we had a comment from Donald Trump, who again threatened to dismiss Jerome Powell if he does not leave his position in mid‑May - the slide scenario is however possible, as Kevin Warsh’s hearings are delayed and will take place only next week.
From macro data we are after the overnight releases of Chinese data - Q1 GDP accelerated to 5.0% YoY, but March investment data fell (1.7% YoY), and retail sales (1.7% YoY). Overnight also came Australian data - they did not provide particularly optimistic surprises, but AUD still gains today. The UK data came out well - GDP in February rose by 1.0% YoY - although this is effectively historical readings, given the conflict in the Middle East.
We still have data from the eurozone - final CPI inflation for March, and notes from the March ECB meeting, which may be closely watched (13:30). From the USA we will learn about weekly unemployment and the Philly Fed index (14:30), and March industrial production (15:15).
EURUSD - resistance at 1.1830 still works
The attempt to break the important area at 1.1830 was not successful today. In the following hours the dollar gained against many currencies, leading to a return of EURUSD below 1.18.
The narrative is becoming important that policymakers may "taper" market expectations of excessive rate hikes this year in response to inflation risks.
Oil started to fall, so bankers may be more interested in how much the war in the Middle East has not overly harmed economies (and IMF forecasts already take into account a slowdown scenario) and will prefer a wait&see stance. This may mean that for potential rate hikes, whether in the ECB, BOE, or BOJ, we will have to wait until the holidays (unless something else appears in the meantime).
Daily EURUSD chart
Technically the dollar is starting to have room to react in the coming days. The correction on EURUSD should not be particularly deep - key supports are 1.1665-1.1700.
