Traders have dropped the dollar like a hot potato over the course of the last five working days, with the dollar DXY index falling 1.75% against G10 counterparts. A dovish Fed isn’t the only reason to sell the dollar as US fixed income yields reduce, but also the political risk that is mounting globally with Trump announcing sanctions on Iran’s supreme leader along with other figureheads. The Trump administration ordered new sanctions that aim to freeze the assets of Leader Ali Khamenei along with Iranian military commanders while also aiming to target Foreign Minister Zarif later this week. The economic pressure continues to mount from the US on Iran as the Trump administration turns the screw further to bring Iran to the negotiation table. Furthermore, Trump has also asked other nations to keep a close eye on developments from the suspected nuclear state along with the Persian Gulf after the latest oil tanker incidents, following a brash tweet where the Don slammed other nations such as China for not protecting shipping lanes in the Strait of Hormuz despite being the main recipient of the oil channelled through there. There has been backlash from the Persian state this morning with President Rouhani stating the white house is “mentally retarded” and that the stance from the Trump administration towards Iran shows “despair”. Tensions between the US and Iran will be continually monitored not only in oil markets but across the board as geopolitical tensions take the stage from central banks this week ahead of the G20 summit in Osaka that begins on Friday.
Boris Johnson was seen outside of his natural habitat last night, appearing on television in a BBC interview. The former Foreign Secretary was live on the 10 o’clock news with political editor Laura Kuenssberg where Johnson admitted that the Brexit process didn’t just lie in Britains hands. He also went on to say he believed that “MPs on both sides of the House understand they will face moral retribution from the electorate unless we get on and do it” when questioned about the prospects of a no-deal exit; of which Johnson believes there will be sufficient support in the House of Commons come October if it gets to that point. Johnson has previously shied away from the spotlight, like a rare and endangered animal in the wild, but has broken cover after increasing calls from opponent Jeremy Hunt as the final two compete in the race to number 10. Johnson refused to engage in discussions regarding his personal life and will also be on LBC radio this morning at 09:30 BST. With the data calendar significantly light for the pound this week, politics remains in scope along with broader macro developments.
The euro advanced against USD for the fourth consecutive day yesterday to reach fresh three-month highs, despite a lukewarm print for the German IFO survey. The Business Climate component of the survey fell to its lowest level since 2014, while the expectations sub-index deteriorated further from last month’s low reading. European Central Bank Vice President Luis de Guindos was on this wires this morning, expressing concern about banking profitability – something the ECB could well address through a tiered deposit rate, possibly accompanied by cuts to the lowest rate. His colleague Benoît Cœuré will speak in Frankfurt at 18:15 BST.
$57 a barrel of WTI is light sweet music to the loonie’s ears as it continues to rally with supply worries pushing crude prices higher. The loonie continues to rally along with crude markets as tensions between the US and Iran mount, with pressure to keep the Strait of Hormuz open despite calls from Iran to close the shipping lanes where around 30% of the sea-borne oil passes through. Thus far, the loonie has found a source of strength from the ramping up of geopolitical tensions and more accommodative stances central banks. Today, wholesale trade sales for April are released at 13:30 BST.