Yesterday’s trading session was once again dominated by a plethora of contradictory geopolitical headlines from the US and Iran, as well as a host of other “interested parties”.
Trump continues to talk up the chances of a ceasefire, whilst Iran remains steadfast that "no legitimate negotiations" have taken place; and, later, flatly rejecting the US's 15 point plan.
Elsewhere, UK annual YoY headline inflation data released yesterday came in as expected at 3.0%, with core inflation registering above forecast at 3.2%. This, combined with Monday’s PMI data, has prompted further hawkish rhetoric from the BoE. Bank of England MPC member Megan Greene said Wednesday inflation persistence risks have risen "perhaps significantly" and as a result UK households may have become more sensitive to inflation shocks. She highlighted a recent Citibank survey which showed one-year inflation expectations surged to 5.4% in March from a previous 3.3% in February, marking the biggest monthly jump in over 20 years.
*Daily move - against G10 rates as of 17:00 GMT, 25.03.26
** Indicative rates - interbank rates as of 17:00 GMT, 25.03.26
Yesterday’s inflation readings pre-dated the oil price spike generated by the conflict in Iran. The flat reading was, therefore, not a surprise; but, given that the reading was considerably above the target of 2%, it’s inevitable that upcoming Bank of England meetings will become ‘live’ for a hike.
Markets will continue to move headline-to-headline in relation to the conflict in Iran. Last night, Trump insisted that Iran is at the negotiating table; but, the conclusion of hostilities seems a lot further than Trump is attempting to convey. Markets will be watching closely for US troops being deployed on the ground.
There is a plethora of Fed speakers this evening who will no doubt face questions about the path of interest rates.
Watch out for rate hike expectations increasing which will boost the USD.
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