One-trick market
Yesterday saw significant volatility once again driven by, you guessed it, turbulent news flow surrounding the US-Iran conflict. The biggest move came just shortly after 13:15 BST when markets placed their convictions behind an unlikely source. It was reported by Al Hadath, a Saudi state-owned news channel, that work was ‘underway… to put the finishing touches on the text of an agreement between Washington and Tehran’. In addition, they reported that a meeting may take place today in Iran to announce the final draft agreement.
Within a minute or two EURUSD climbed circa 0.3% with cable following suit. Given the origin of the news-source being a not-so-often quoted channel internationally, the price move was somewhat chaotic with traders scrambling to identify the origin of the risk-on bid. The rest of the afternoon’s news flow on the topic of war challenged this position, ultimately eroding risk sentiment once again, driving the Dollar and key commodities back within their intraday ranges. This was whilst the US and Iran exchanged tit-for-tat threats on the consequences of non-agreement.
Fed minutes released overnight have served to support the mild Dollar sell-off triggered by the initial news flow. We now know for sure that there was a shifting bias at the April meeting amongst members of the FOMC towards dropping an easing bias. What was abundantly clear though is that rate-setting members of the Committee were in no rush to adjust rates and continue to favour a cautious approach.
Discussion and Analysis by Charles Porter
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