Once again it's Trump comments that push markets

Good morning

The ECB did raise interest rates 25bps to 2.25% yesterday, a move that was widely expected and priced in.  Lagarde warned of a possible slowdown, citing the Iran war as the primary reason.  She failed to give much of an idea of rate moves going forward but as with most central banks they will have to balance the risk of fighting higher inflation while protecting economic growth. 

As has been the case for a while now, the market is getting pulled around by comments from Trump over the Iran war.  The US dollar was stronger yesterday afternoon on concerns we were no closer to any peace deal, with Trump warning they will again hit Iran hard.  However after the London close we saw the likes of GBPUSD and EURUSD trade from 1.3330 and 1.1505 to highs of 1.3435 and 1.1590. 

The USD sell-off came as Trump said he was calling off strikes because Iran had agreed some of the finer details of the peace plan, which led to equities bouncing and oil prices dropping to levels not seen since the ceasefire was announced in mid-April.  No deal has been signed as yet, Iranian officials haven’t confirmed a deal is pending, but Trump has intimated something could be signed over the coming weekend.

This morning we had some softer than expected UK data, both GDP and Industrial Production disappointed which has seen GBP sold off, GBPUSD now 1.3390 and GBPEUR off a few points to 1.1580, failing once again around the 1.1600 area as it has several times over the past year or so.  Meanwhile, PM Starmer was dealt another blow yesterday as his Defence Secretary John Healey and Armed Forces Minister Al Carns both resigned over a dispute about military spending, saying investment in the military falls well short of what is required.  This brings the total number of ministers to resign in the last month to seven. 

Elon Musks SpaceX has raised $75bn in its IPO, with shares priced at $135, valuing the company at $1.77trn.  Trading will begin today with some forecasters suggesting the price will push up close to $200.

The football world cup has begun with Mexico winning the opening match against South Africa, a game marred by three red cards.  South Korea came from behind to beat Czech Republic.  Several matches over the weekend, the highlight perhaps being Brazil against Morocco although that doesn’t start until 11pm tomorrow evening.  F1 action comes from Barcelona this weekend the race at 2pm Sunday afternoon.

Looking ahead to the weekend, we are in for some drier weather but I see the forecast is showing lower expected temperatures than it did earlier in the week.  It looked like we may be in for another spell of decent weather, up in the mid to high-20’s which is pretty perfect, but now it seems we’ll be lucky to get much over 20°c this weekend, although it still looks hopeful for later in the week.   

We’ve had a pretty quiet week data-wise but next week will be considerably busier in terms of the economic calendar.  We have UK inflation, employment and retail sales, US retail sales and NZ GDP.  We’ll also enjoy interest rate announcements from BoJ, RBA, FOMC, SNB and BoE so plenty to keep us on our toes, even though the majority are likely to keep rates unchanged.

Have a great day, and a great weekend as and when it comes…

-  09.30 UK consumer inflation expectations

-  11.30 ECBs Sleijpen speaks

-  15.00 US Michigan sentiemt survey

-  15.30 ECBs Nagel speaks