China’s Push Into Renewable Energy Has Helped Insulate Its Economy From the Iran War - And the Macro Data Is Turning Bullish
Big week ahead for the interest rate landscape with the Fed, BoC, BoE and ECB all with their policy meetings.
Key Takeaways
Hormuz Closure Hits Oil Prices Even Harder: Oil prices continue to drift higher, with WTI making an approach towards $100 per barrel, with the deployment of U.S. Marines, the attacks on Kharg Island, and the release of SPR oil failing to reverse the uptrend. Every day the Strait of Hormuz remains shut down raises the risk of a global recession, and the supply constraints extend beyond oil to food, chemicals, metals, apparel, and semiconductors.
China Seeks Concessions At Upcoming Summit: China has emerged as a relative winner given its strategic relationship with Iran and will be seeking economic concessions from the U.S. at the coming summit between Xi Jinping and Donald Trump in order to play a role in brokering some sort of impasse (or even a deal). All the while, the macro data in China are turning the corner, and deflation pressures are ebbing.
Central Bank Guidance Is the Focus This Week: The Fed meets this week, replete with fresh projections and dot plots, and it seems doubtful that it will be signaling any move to help investors out. From two full cuts being priced in at the start of the year to just one now, and not till September at the earliest. In fact, the swaps market is now pricing in a 34% chance that the Fed doesn’t cut rates at all in 2026. In addition to the Fed, we also have the Bank of Canada on Wednesday and the BoE and ECB on Thursday — where markets are pricing in rate hikes by the end of the year, which I find to be ridiculous, so my belief is that the front end of the bond curves in these areas represent very attractive buying opportunities.
