Iran war headlines are likely to continue to dominate investor sentiment as this week’s economic calendar will be relatively light. Last week crude price action has shifted global rate expectations across US, EU & UK. US markets are now pricing in a 28% probability of a rate hike by end CY26. EU markets are now pricing in 3 hikes of 25 bps each by end CY26. UK markets has eliminiated 2 cuts totally and are now expecting more than 3 hikes in REMCY26. This does not augur well for risk assets as well as well as precious metals. In FOMC meeting last week, as expected Powell tone was hawkish during the press con. Powell was explicit about his plans to potentially remain on the board after his term as chair ends in May. He suggested he would serve as Chair Pro Tem if his successor is not confirmed and added that he would stay on the board until the DOJ investigation is resolved. We also see a delay in Warsh taking over as Fed Chair as President Trump signaled his support for the Department of Justice’s investigation against the Fed, meaning Senator Thom Tillis (R-NC) will likely continue to block the nomination of Kevin Warsh as the next Fed Chair. Also, reportedly, Warsh has not submitted necessary paperwork to the Senate Banking Committee. A delay of his confirmation poses a risk of the next rate cut being pushed back beyond June. We now see only one rate cut of 25 bps in Q4CY26 in US. In US macro data this week, we have initial jobless claims, Univ of Michigan, import price index & non farm productivity. In UST dated supply, we have $69 BN of 2 year auction on Tuesday, $70 BN of 5 year auction on Wednesday & $44 BN of 7 year auction on Thursday. In EU, we now see 2 hikes of 25 bps each in June & Sep as we expect inflation to print above target in H1 2026, due to the Iran War. In UK we now expect no cuts but no hikes as well as UK economy remains weak. In RoW macro data this week, we have German IFO survey, UK Feb CPI & European PMIs this week.
