Dollar continues to press higher to start the new week
The US and Iran framework agreement remains fragile at best and as seen from the weekend, it can all fall apart at any point in time.
There is some progress in talks in Switzerland but until we do see some real evidence of progress, it's hard to imagine things actually getting better. For now, Iran doesn't really care and will look to take advantage of the concessions made - all the while the Strait of Hormuz remains in somewhat of a managed close/open.
In that lieu, oil price futures may reflect a decline in recent weeks still. However, the reality of the situation is that inflation pressures are continuing to ramp up globally. It's not just energy prices. Supply chain disruptions are also a massive headache for many businesses and firms, making for tougher times in needing to pass on costs to consumers.
And with that continuing to play out, we are starting to see markets shift to favour a more hawkish Fed. That is the key factor in providing a tailwind for the dollar at the moment.
As things stand, Fed funds futures are now pricing in ~41 bps of rate hikes by year-end with the first full 25 bps rate hike almost fully priced by September. What a change in the wind direction.
Fed chair Warsh's press conference last week was a key catalyst but his stance is very much predicated on what is happening in the Middle East. So, all roads lead back to Tehran.
For now, the dollar continues to nudge up with EUR/USD down 0.2% to 1.1445 and GBP/USD is closing back on its opening gap lower earlier - down 0.3% to 1.3190.
The latter continues to be plagued by UK political woes as well, with Starmer set to resign as prime minister and Burham set to roll out the red carpet for his march to Downing Street. But whatever the case is, things will continue to look tough for the pound with UK's fiscal position not likely to change for the better under Burham.
Meanwhile, USD/JPY is up 0.3% to 161.75 and AUD/USD is on the verge of a breakdown as price is flirting with a drop under 0.7000.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The AI boom may follow the path of the 19th-century railway bubble, and builders may not be the ultimate winners
Goldman Sachs analyst Bobby Molavi compared the current situation to the 19th-century British railway mania: 500 companies spent more than the nation's annual income building 8,000 miles of railway, with most early investors losing out, while the real beneficiaries were the later "passengers." He pointed out that the current AI craze is driven by both debt and momentum, and that the S&P 500’s forward P/E ratio of 18x is only "a bit cheaper." Whether the builders can retain value is uncertain, and history does not offer an optimistic answer.
If Anthropic's IPO goes smoothly and the stock price rises next week, then everything remains the same for AI. Otherwise, some companies will go bankrupt.
The shrinking valuations of two major giants have triggered a chain reaction—investors are adopting more conservative revenue multiples for AI startups and are directly halting high-valuation financing for companies with zero revenue. Multiple venture capital firms have advised their portfolio companies to lower valuation expectations and to quickly build up cash reserves. Market participants warn that the outcome of Anthropic’s IPO will be a barometer for the industry: if successful, the boom will continue; if it fails, some companies may face elimination.
After the Brazilian election, political discount deepens; Morgan Stanley remains bullish on Petrobras (PBR.US), focusing on fuel pricing and dividends
Morgan Stanley still maintains its most optimistic "Overweight" rating, but has lowered its year-end 2027 target price from $31 to $25.
Corning (GLW.US) receives initial "Buy" rating from Jefferies! AI factories driving a fiber optic rush, with a potential global supply gap of up to 30%
For Corning, the recent profit growth mainly comes from the expansion of AI clusters. As the number of optical links crossing cabinets and campuses increases, customers need to deploy more optical fibers within limited conduit and cabinet space, thus driving demand for high-density optical cables and connection systems.
Crypto prices
More
