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2 days ago | 
think.ing.com | Warren Patterson |Bert Colijn |Francesco Pesole |Rebecca Byrne
A US-brokered ceasefire between Iran and Israel sent oil prices tumbling this week, as traders and investors bet the bombing campaigns are over, and that the crucial Strait of Hormuz, through which 21 million barrels of oil pass each day, will remain undisturbed. The drop in oil prices is good news for global growth and for inflation, potentially giving central banks in Europe and the US some breathing room to cut interest rates later this year. But is the crisis really over?
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5 days ago | 
think.ing.com | Carsten Brzeski |Warren Patterson |Francesco Pesole |James Knightley
On Sunday morning, the conflict in the Middle East escalated further with the US bombing three nuclear facilities in Iran. US President Donald Trump called the strikes “very successful” and US Defence Secretary Pete Hegseth claimed that the US had “obliterated” the facilities, while Iran reported only limited damage. This leaves us with the all-too-familiar sense that we understand far less than we thought we did this morning.
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1 week ago | 
think.ing.com | James Smith |Francesco Pesole
Does that mean faster rate cuts? For now, we think it’s unlikely. Yes, three out of nine officials voted for an immediate rate cut this time. Investors may well take that as a hint that the tide is turning on the committee. But past experience has shown that the vote split contains few useful signals. December’s meeting saw a similar 6-3 vote, yet heralded little change in the Bank’s overall stance. The hawks, meanwhile, will also have a beady eye on oil prices.
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1 week ago | 
think.ing.com | Francesco Pesole |František Táborský
USD: Still upside risks The two major US macro events yesterday (the FOMC and TIC data) left very few marks on FX. As discussed in our Fed review, markets are understandably attaching limited value to dot plot projections given the high uncertainty of the tariff impact and recent oil volatility. And while keeping two rate cuts in the 2025 median projection may seem moderately dovish, the Fed sounded less concerned about growth and unemployment.
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1 week ago | 
think.ing.com | James Knightley |Padhraic Garvey |Francesco Pesole
Fed still projecting rate cuts this year Unsurprisingly there was no policy rate change from the Federal Reserve at today’s FOMC meeting. This leaves the Fed funds target rate range at 4.25-4.5%. The accompanying statement adds little, repeating that activity is expanding at a "solid pace" while inflation "remains somewhat elevated". It was a unanimous decision.
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1 week ago | 
think.ing.com | Francesco Pesole |František Táborský
The combination of rising geopolitical risk and oil prices has temporarily re-established some safe-haven appeal for the dollar. Yesterday’s USD jump was likely exacerbated by some positioning squeeze, and triggered by another leg higher in oil prices as Israel intensified its strikes on Tehran, and speculation about the US joining the attack flared up. Should such speculation prove correct, the upside risks for oil could increase further, opening up fresh upside room for the dollar.
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1 week ago | 
think.ing.com | František Táborský |Francesco Pesole |Chris Turner
USD: Trade versus geopolitical news The situation in Israel and Iran has shown few signs of de-escalation, and while that is offering intermittent support to the dollar, it has so far failed to generate a major rebound in the greenback. The main geopolitics-FX channel remains oil, whose price action suggests markets believe the worst of the impact may be past us.
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1 week ago | 
think.ing.com | Francesco Pesole |František Táborský
This was always meant to be a very busy week for markets, as a few key central bank meetings – including the Federal Reserve's – were set to refresh the market understanding of policymakers’ stance on the inflation-growth balance in the second month of global US protectionism. But as we know, geopolitical developments have stormed into the picture, and the implications of the Middle East crisis for energy markets can easily spill over into central banks’ inflation assessments.
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2 weeks ago | 
think.ing.com | James Smith |James Knightley |Charlotte de Montpellier |Francesco Pesole
Good cuts, bad cuts Alright, kids, what meme best describes how markets are thinking about central banks right now? How about Gru from Despicable Me? If you’ve not heard of him – and I’ll confess I hadn’t - it’s a scene where he’s explaining his faultless plan to steal the moon, only for it to take an unexpected turn mid-way through. Bear with me and let me explain my thinking. That's if it's not already clear from my work of art above... Rate cuts come in two forms.
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2 weeks ago | 
think.ing.com | Francesco Pesole |František Táborský |Chris Turner
The dollar is stronger across the board this morning after Israel attacked Iran's nuclear facilities. The main transmission channel from this specific geopolitical risk and FX is the price of oil, which has rallied around 8% since the Israeli strike. In other conditions, the DXY rally would likely be much larger than the roughly 0.75% rebound from the overnight lows we have seen so far, because the dollar would also benefit from the negative shock in equities and bonds.
