Good morning. Oil prices are nearing pre-war levels as supertankers begin moving through the Strait of Hormuz, and the dollar is trading near a one-year high after the Federal Reserve delivered a “hawkish hold” in Kevin Warsh’s first meeting as chair. Both of the major global crude benchmarks are trading just above levels reached in the immediate aftermath of US and Israeli strikes on Iran in early March. Brent is changing hands at $78 a barrel and West Texas Intermediate at $75 after President Donald Trump* and Iranian President Masoud Pezeshkian signed a 14-point memorandum extending April’s ceasefire by another 60 days. The terms are sweeping: an immediate end to hostilities on all fronts, including Lebanon; the full resumption of traffic through the Strait of Hormuz; the lifting of blockades and US sanctions on Iran; the unfreezing of Iranian assets; and a $300bn investment fund for postwar reconstruction. Iran reiterated a pledge not to build nuclear weapons—a vow it...

The Federal Reserve left interest rates unchanged, stripped forward guidance from its communications, and signalled a dramatic hawkish shift in its reaction function at Kevin Warsh’s first meeting as chair—confounding expectations for a smooth transition from the Powell era. In significant revisions to the statement, officials removed anything resembling a forward policy outlook, including the easing bias that had previously drawn dissents from three regional governors. In an extraordinarily-brief passage, the committee described economic activity as expanding at a solid pace despite elevated uncertainty tied in part to the Middle East conflict, pointed to strong productivity growth and capital investment, and noted that job gains were keeping pace with the workforce. On inflation, officials acknowledged that price pressures remained elevated relative to the 2% target, attributing the overshoot in part to supply shocks—particularly in energy—rather than broad-based demand. More...

Good morning, and happy Federal Reserve day to all who celebrate. Markets are on tenterhooks ahead of Kevin Warsh’s first meeting as Federal Reserve chair, with Treasury yields firming, the dollar advancing, and most major currency pairs trapped in tight ranges. After a copy of the US-Iran ‘memorandum of understanding’ was released by major news outlets, both global oil benchmarks are edging below $80 a barrel as traders bet on a full resumption of energy flows through the Strait of Hormuz by the end of July, with Gulf output expected to recover to near pre-war levels by early October. The Canadian dollar is under pressure, slipping below a key psychological level in early trading as lower crude prices erode the country’s terms of trade and a weak domestic economy widens interest rate differentials with the United States. The world’s most powerful central bank is widely expected to leave benchmark rates unchanged at the conclusion of today’s meeting, but with recent data showing...

Good morning. The dollar is flat, Treasury yields are edging lower across the curve, and oil prices continue to decline as traders await details of the US-Iran peace deal ahead of its signing on Friday and brace for turbulence around tomorrow’s Federal Reserve decision. Brent crude is changing hands at $81 a barrel and West Texas Intermediate at $78, with both benchmarks down nearly 11% this month. Currency market reaction to the weekend’s ceasefire agreement has been surprisingly muted, with most major pairs moving less than a third of a percent since the news broke. To some extent, this reflects uncertainty in the energy complex: observed traffic through the Strait of Hormuz remains near zero, the reopening process promises to be gradual, and the inventory resupply needed to normalise global markets could keep prices elevated for some time. Iranian and American sources are also characterising the deal in starkly different terms, particularly over who will control the strait,...

After delivering three consecutive interest rate hikes to start the year, as expected, the RBA kept the cash rate steady at 4.35% today. The decision was “unanimous” as the RBA Board steps into a “hold-and-assess phase” after recalibrating the level of interest rates to a more “restrictive” setting over Q1/Q2 2026. According to the RBA, inflation is still “too high”, yet at the same time financial conditions have “tightened”, there are signs “growth in consumer spending is slowing”, momentum in the housing market “has shifted”, and unemployment was “higher than expected” in the recent jobs report (charts 1 and 2). It is a challenging time for policymakers, and for households/businesses across interest rate sensitive sectors. In our judgement, after its rapid-fire recalibration the RBA is no longer chasing inflation higher, rather it is now trying to manage risks inflation becomes embedded across the economy (chart 3). The RBA notes that to ensure this doesn’t happen “growth in...

• US/Iran news. Oil fell & equities rose on the back of US/Iran news. FX more muted reflecting the uncertainty & macro challenges that remain.• Event radar. China data due today. BoJ expected to hike rates & RBA predicted to hold. US Fed later this week, the first meeting for new Chair Warsh. Global Trends It has been a relatively upbeat start to the week with markets reacting somewhat positively to the news that a deal has (finally) been struck between the US/Iran. It isn’t a final deal, rather only a Memorandum of Understanding for a 60-day ‘ceasefire’ that will see the Strait of Hormuz reopened. Notably, the MoU doesn’t address Iran’s nuclear programme, which will be discussed over the next 2-months, so there is a chance this latest agreement breakdowns at some point as upcoming negotiations could be tricky. Moreover, as discussed before, the conflict should only be seen as the end of ‘phase 1’. The impacts on the global economy from prolonged disruptions to energy...