North American Summary and Highlights 20 May

North American session

Hopes for a deal between the US and Iran, with Al Arabiya News suggesting could come as early as Thursday, saw the USD, oil and UST yields slipping and equities rallying. There was not much response to the 20-year auction nor the FOMC minutes. The latter showed hawkish concerns over the easing bias went beyond the three hawkish dissenting votes seen at the meeting, though also suggested that easing could still be possible this year if the Middle East conflict was resolved soon.

USD/JPY fell back below 159 to 159.80 and EUR/USD moved back above 1.16 to 1.1635. EUR/GBP found support below .8650. AUD/USD advanced to .7150 with AUD/CAD also firmer as USD/CAD saw only marginal losses.

European session

A nervy holding pattern at present as the market waits on the next strong direction, be it from more compelling news on Iran or fresh independent direction on the broader risk and/or yield side. Brent is -1.7% on the day following the more upbeat White House spin, though still well within the week’s range set on Monday. Given how comments keep swinging hot and cold, even at the same time, market commitment remains limited.

Risk markets holding in steady on the morning, paring dips, semiconductors managing another bounce while waiting for Nvidia. US yields a little off Tuesday’s 16-month highs, with 20yr auction in focus later, along with Fed Minutes, and of course Iran developments.

FX markets largely quiet and also in recent consolidative areas – minor upside on the morning from USD/NOK and USD/CAD (+0.3%) as oil comes off a touch and dollar stays supported, but nothing notable.

UK CPI on the low side of expectations at 2.8% from 3.3%, albeit with PPI data on the firm side with output prices 4% from 3% (mkt 2.8%) and input prices 7.7%y/y from 5.3% (mkt 5.9%). Sums up the current state of play. Negligible 10 tick blip higher from EUR/GBP on the release but fleeting, cross on the low side of flat for the morning.