American trade imbalances aren’t going away, just moving geographically By the time Donald Trump entered the White House in 2017, faith in free trade among America’s elite had already collapsed. Antipathy to globalisation was the closest thing Washington had to consensus, and the $552-billion deficit the United States ran that year was seen as evidence of national surrender. In the years since, presidents of both parties have wielded tariffs against adversaries and allies alike, raised regulatory barriers, and launched vast reshoring efforts aimed at closing trade imbalances—leading many pundits to declare the age of globalisation over. Trade flows haven’t got the memo. Global volumes rose 7% in 2025, accelerating from 4% the year before, according to the World Trade Organization. Trump’s “Liberation Day” tariffs, imposed last April with much theatre, did not reduce trade so much as reroute it: data published yesterday showed the gap between US exports and imports of goods...

The dollar is trading near its lowest levels in months, bond yields are plunging, and equity indices advancing after Axios reported that Washington and Tehran are nearing an agreement to end the war in the Middle East. Both global crude benchmarks are down more than 9%, with Brent trading below $100 and West Texas Intermediate nearing $90, and most major currencies are climbing against the greenback as traders scale back expectations for an energy price-induced shock to economies with heavy import exposures. A US-Iran deal could reshape the conflict and reduce risk across the global economy. According to Axios, Jared Kushner and Steve Witikoff are negotiating a one-page, 14-point memorandum of understanding that would see Tehran pausing its nuclear enrichment activities, the US lifting sanctions on Iranian trade and money flows, and both sides ending their blockades on shipping through the Strait of Hormuz. A rapid refilling of worldwide energy inventories could follow, easing growth...

The RBA continues to take few chances when it comes to the problematic domestic inflation trends with another interest rate hike announced today. This is the third consecutive meeting the RBA has tapped on the brakes with the latest 25bp increase moving the cash rate up to 4.35%. Policy settings have been recalibrated quickly. The interest rate ‘relief’ delivered last year has been unwound with the cash rate back at the ‘peak’ reached in the 2023/24 inflation fight. Today’s decision wasn’t unanimous with the RBA Board voting 8-1 in favour of a hike. It was a matter of when, not if, the RBA acted again with the market assigning a ~75% chance of a move today and another hike fully factored in by the next meeting in June. The focus now is on whether the RBA remains on an inflation war footing and moves interest rates further into ‘restrictive’ territory to definitively win the battle, or if the looming growth slowdown because of the jump in fuel and interest rates causes policymakers to...

• Optimistic markets. Equities rose, oil dipped on positive US/Iran vibes. More volatility likely. USD softens. AUD whipped around by push/pull forces.• RBA hike. RBA announced its 3rd straight rate rise. Another hike more likely than not. But it will come at an economic cost. Growth set to slow sharply. Global Trends Sentiment about the situation in the Middle East has generated a few bursts of volatility over recent sessions. Following a deterioration in risk appetite yesterday indications the US/Iran ceasefire is holding eased fears overnight. US officials downplayed Iran’s actions stating that the targeting of warships and attacks on vessels in the Strait of Hormuz were below the ‘threshold’ for restarting the conflict. The rebound in equities helped the US S&P500 (+0.8%) edge up towards record highs. Oil prices eased, though at ~US$110/brl brent crude remains elevated. Outside of a lift in UK bond yields, rates across Europe and the US slipped back. In FX, the USD softened...

America produces more crude than anyone. That does not spare it—or the dollar—the consequences of an oil shock. A comforting narrative has taken hold in Washington. The shale revolution, which transformed America into the world’s largest producer of crude oil, is supposed to have insulated the country from the geopolitical convulsions that have long roiled energy markets. Since the war in Iran was launched at the end of February, Donald Trump has repeatedly suggested that higher prices are to America’s benefit, gesturing at the tankers loading up in American harbours as proof of the economic windfall. In foreign-exchange markets, the dollar’s traditional inverse relationship with crude has broken down; the greenback now often strengthens when benchmarks rise, and some have suggested that the greenback is becoming a “petrocurrency”*, acquiring a status previously held by units like the Canadian dollar and the Norwegian krone. There is a kernel of truth...

Good morning. Markets are steadying and crude prices are pulling back from their highs as the US and Iran avoid further escalation after a series of skirmishes in the Strait of Hormuz raised questions about the durability of the ceasefire struck in early April. Yesterday’s American attempt to open the waterway—dubbed “Project Freedom”—sank at least six Iranian fast-attack boats and triggered drone strikes on cargo and tanker ships, along with missile attacks on infrastructure in the United Arab Emirates, sending energy benchmarks soaring. With Washington and Tehran making somewhat-conciliatory noises, Brent crude for July delivery is edging lower after jumping nearly 6%, Treasury yields are drifting down, equity futures are pointing to a modest advance at the open, and currency markets—with a few notable exceptions—are trading little changed from Friday’s close. The yen remains exceptionally volatile as traders weigh short-term intervention risks against more fundamental terms-of-trade...