The shaky and confusing ceasefire between Iran and the USA and Israel is basially holding into its second day, as the USA and Iran prepare for talks in Pakistan.
- After making strong threats to bomb Iranian infrastructure such as power stations, the parties to the war agreed a two-week ceasefire a bit more than 24 hours ago. There is major dispute over which drafts are tentatively agreed, fully agreed, or even subject to discussion. The major gaps so far seem to be Iran's insistence that the ceasefire is meant to cover Lebanon as well (the USA and Israel understand otherwise), and an idea that going forward Iran will continue to exercise some kind of control over the Strait of Hormuz and possibly even charge ships fees for transit, despite the Strait being an international waterway under international law. It also seems that Iran will be likely to demand some kind of nuclear enrichment right, even if some kind of cap and the export of the already enriched uranium is agreed.
- The ceasefire is shaky, and it is hard to see the parties really agreeing to a deal. The Americans will probably feel they should test the water and see who is really in charge in Iran right now and what their negotiating stance is. However, it is also hard to see what more the USA could achieve without the use of ground forces which would likely incur casualties, so a deal could be more likely than many people think.
- The impact of the ceasefire announcement was immediate and dramatic: Crude Oil fell by about 17%, and major stock market indices, especially in the USA, rose but by much less (the S&P 500 Index quickly rose by about 2.5%). The S&P 500 Index is now trading well above its 200-day simple moving average, and is quite far from correction territory.
- The precious metals Gold and Silver initially jumped on the Iran ceasefire news but have since given up all gains from that event. I see this as a note of caution precious metals bulls should pay attention to.
- In the Forex market, the New Zealand Dollar has been the strongest major currency since today's Tokyo open, while the Japanese Yen has been the weakest. The USD/JPY currency pair continues its bearish retracement. Trend traders will still be long of USD/JPY on the bullish breakout which we saw two weeks ago, although this very slow-moving trade is looking less and less attractive.
- FOMC Meeting Minutes released some hours ago showed that more Fed members are prepared to think about hiking rates instead of cutting them, but this was no surprise.
- There will be two high-impact data releases today in the USA:
- Core PCE Price Index (this will be especially closely watched as the Fed like to use it as a leading indictor of inflation.
- Final GDP