In addition to geopolitical headlines, market participants will have to process speeches from a number of Fed officials, most notably Chair Powell's moderated discussion and NY Fed President Williams’ speech, both on Monday, as well as a smattering of data before they are able to leave for the Easter weekend (bond markets have an early close while equity markets are closed for the Good Friday holiday). Tensions and uncertainty remain elevated between the US and Iran with media reporting both signs of escalation and negotiations. Our own view is that Iran is winning this war. Though there is a high probability of a US ground operating around Kharg island around 6th April, unless US holds any territory, it has no advantage. Iran still has almost 70% of it's missile stock as reported in media last week. Houthis remain in reserve & are another unspent force for Iran. We dont believe Iran will end war on US terms as Iran sees it's current state as an equal to US-Israel front. We also believe Strait of Hormuz might soon see a Iran controlled tolled traffic post war on lines similar to Suez Canal authority. On macro front, we have the March NFP as well as JOLTS, ISM manufacturing, trade balance data this week. We expect March NFP at 45k and unemployment rate at 4.4%. We now expect the Fed to delay its lone 25 bps cut to Q4CY26 this year (our prior forecast was for June and September). Diminishing near-term political pressures, specifically a delayed confirmation for Chair nominee Warsh, and inflationary pressures from the Iran War led us to push back the timing of cuts. US markets are currently pricing in 24% probability of a rate hike in REMCY26 which looks stretched to us. Hence, we like to receive 1yr-1yr US SOFR around 3.75 levels (currently 3.67) for a profit target of 3.50 with a stop loss at 3.90. We also like 2*10 US steepeners at current levels of 22. We have a profit target of 40 in this trade with stop loss at 15. On RoW front, Europe has German, French & Eurozone March inflation data this week which will show the impact of elevated energy prices post the middle east conflict started from 28th Feb. 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 75 bps of hike being priced in REMCY26. In China, we have PMI datas this week which we expect to be on the softer side due to the middle east energy shocks.
