On Wall Street we have a "performance" bull market, where AI-related topics dominate (not surprising), while oil "stagnated" after a failed attempt to hit the highs at the beginning of March and April, which occurred at the end of last month. More and more people talk about returning to a "military solution" against Iran, but investors seem to be waiting for Trump to meet Xi Jinping, as if China were now the key geopolitical player.
But even if... what would be the price for a "Chinese" peace in the Middle East? Theoretically Americans go to talks for trade purposes - the finale should be a concrete deal signed at the end of the year (Xi's review in Washington in December) - but do they have strong cards?
Risk of higher inflation is rising
In macro topics, the risk of higher inflation is rising - the Tuesday CPI reading above forecasts in April forced an increase in expectations of a rate hike by the FED at the end of the year. Markets are starting to take into account that Kevin Warsh may not have much of an exit. Of course, this situation is closely related to what is happening in the Middle East and the outlook for the oil market.
In Europe, attention is starting to be drawn to the difficult political situation in the United Kingdom - a strong defeat of the Labour Party in local elections at the beginning of May, increasing pressure for a serious government overhaul - some politicians are demanding the resignation of Prime Minister Starmer. This could affect UK government bonds (yield rise), but also the pound's behavior.
Today in the macro calendar we don't have many data - at 14:30 attention will be drawn to US PPI inflation - also markets will be more speculative around US-China talks. Investors waiting for a deal?
Communications after meetings officials will probably be quite laconic, although with the notes they could start, for example, rumors about a possible easing of restrictions on trade with China for NVIDIA (the CEO of the company was part of the delegation with Donald Trump).
EURUSD - the second black candle
Wednesday brings another falling candle on EURUSD. The dollar gains after yesterday's CPI inflation exceeded expectations and the "taboo" is starting to be broken - Kevin Warsh could raise rates again in Q4 of this year - the probability of such a move in December jumped to 33%.
Today at 14:30 we will see the producer PPI data - expectations are high, will they be beaten?
This could give arguments for a dollar rise in the coming days. And the Trump-Xi meeting?
Markets may be more worried about the increased probability of an attack on Iran after the end of this peak, unless the Chinese do not consider that a key geopolitical deal can be made with Iran.
Daily EURUSD chart
