The market believes in a breakthrough
Looking at oil price changes, investors for some reason believe in a breakthrough. On Friday we had a Brent variation of over 105 USD per barrel, and this morning it is 4 USD cheaper. A level of 101 USD is obviously not a threshold that would indicate investors' faith in a quick peace.
It looks more like an increase in the chances of at least partial clearing of the waterway through the Strait of Hormuz. It is worth noting that even on Friday American oil was 11 USD cheaper, and today that difference is only 5 USD. This shows that the market is leveling out.
The clearly higher Brent oil price results from the fact that it is a benchmark for global prices. It is therefore much more affected by the conflict in the Middle East than by a commodity extracted in the USA and priced there. However, it is worth remembering that talks are ongoing, and current movements result from changes in investor expectations, not real breakthroughs in negotiations.
Currencies also believe
Along with the decline in Brent oil prices we also have a second signal indicating investor expectations of a de-escalation of the conflict. It is the reversal of the dollar. This move is, however, far less impressive than changes in oil. Currency markets, like precious metals, no longer react as strongly to further expectations of a breakthrough.
Probably because most analysts currently believe most in the scenario of gradual clearing of the Strait of Hormuz and the end of fighting without a formal peace signing.
Both sides must be able to announce success. It is worth noting that negotiations are at a standstill. The key issue is whether there should first be a cessation of attacks and only then talks about a nuclear program, or vice versa. Americans want to talk first, and Iran wants to stop being bombed first.
The new Fed Chair is getting closer
Kevin Warsh was nominated as Fed Chair before Donald Trump, but the procedure is not going smoothly. In recent days, however, a breakthrough occurred. One of the Republican senators blocked his candidacy until the investigation against the current Fed Chair was concluded.
It concerned alleged irregularities in the renovation of the bank's headquarters. With the closure of this proceeding, a pledge of support for the application has appeared.
If the Senate Banking Committee accepts Kevin Warsh, the next step is a vote by the full Senate. This event is preceded by another series of questions to the candidate. It should be remembered that a simple majority of 51 votes is needed in the Senate.
Currently Republicans have 53 votes, so if at least 3 Republican senators do not break away, with full opposition from Democrats and two related independent candidates, there should be no surprises.
Today in the macroeconomic calendar there are no important readings.
