Geopolitical headlines are likely to continue to drive financial markets amidst a relatively light economic calendar. President Trump on Friday lauded Iran’s apparent opening of the Strait of Hormuz and signalled that a broader deal with Iran could be reached as soon as the weekend. However, details were unclear given the vague and at times conflicting statements by Iranian government officials and the Trump Administration. The outcome of the Monday talks in Islamabad– should they take place - will set the tone for risk this week. Importantly, investors will be monitoring for signs of improvement in the flow of energy from the Persian Gulf region in the wake of last Friday’s oil price plunge on the back of the aforementioned announcements. As per current data available to us, observed transits of commercial ships through the Strait of Hormuz have come to a halt following a brief surge on Saturday as tensions ratcheted higher after vessels came under gunfire in the waterway and Iran warned against crossings. No crossings were seen today, according to tracking data compiled by Bloomberg as of early afternoon in London. At least 13 oil tankers turned back toward the Persian Gulf on Saturday, abandoning attempts to leave. Aside from the US / Iran talks, the main event for market participants is likely to be Fed Chair nominee Kevin Warsh’s confirmation hearing before the Senate Banking Committee at 10AM on Tuesday. In US macro data, we now expect core PCE for March to come now at 0.26% MoM & 3.1% YoY. We expect core PCE for Dec'26 to end at 3.1% YoY. In US macro data this week, we have Univ of Michigan survey, retail sales, pending home sales & S&P PMIs. There are no fed speakers this week as FOMC remains in black out period before the FOMC meet on 29th April. With the intensity of news flows currently, we continue to believe in a delayed rate cut cycle in US, possibly the 1st rate cut in Q4CY26 after Kevin Warsh has spent some time in FOMC & earned their confidence. While employment remains low hire low fire, inflation is too sticky to ignore. Core PCE is likely to end at 3.1% YoY in Dec’26. That does not augur well for inflation mandate of FOMC. But we believe that employment might worsen by CY26 end leading to an insurance cut. For the last few weeks, we have recommending 2*10 steepeners since 22 levels. Currently it is at 28. We have a profit target of 40 in this trade with stop loss at 15. In UST auction supply this week, we have $13 BN of 20yr supply on Monday & $26 BN of 5 year TIPS on Tuesday. In RoW events, we have Eurozone flash PMIs, German ZEW survey and IFO. We believe if the spot price of Brent were to remain in the $95-100/bbl range by the ECB’s June meeting, then the ECB would raise rates by 25bp in June and then again in September. This is against current market expectations of 33 bps of hike till Sep’26. In UK we have the crucial March CPI data & retail sales data.
