The main highlight in the session war the UK jobs report. The data showed a meaningful drop in the unemployment rate, lower than expected job gains and an easing in wage growth (although the data was higher than forecasts). All in all, the data isn’t urging for rate cuts, so the BoE is more likely to remain on hold until further notice.
The German ZEW sentiment dropped to the lowest level since December 2022 as the fallout from the US-Iran conflict continues to weigh heavily on German investor morale amid higher energy prices and slower growth expectations.
ECB’s de Guindos urged the ECB to “keep a cool head” and be cautious on interest rate adjustments amid the US-Iran uncertainty. Rate hike expectations have eased recently with just a 16% probability of a hike in April and 63% in June. If the war is resolved by June, the ECB will likely keep interest rates steady until September while it gathers more data over the summer.
Numerous reports suggested the BoJ is set to hold the policy rate steady at 0.75% in April. The central bank is expected to keep its tightening bias, while revising growth lower and inflation higher in its quarterly outlook report. The market is pricing in just a 7% chance of a hike at the upcoming meeting, but the probabilities increase to 57% for the June meeting. That will likely depend on the US-Iran negotiations and the Strait of Hormuz.
The market focus remains solely on the US-Iran negotiations. Talks are expected to start on Wednesday in Islamabad. Trump has already shifted the ceasefire deadline from today to tomorrow at midnight allowing for an extra 24 hours of talks before he chooses whether make good on his threat to blow up Iranian bridges and power plants. He’s been repeating that it was “highly unlikely” that he would extend the deadline further, but everyone has been betting on an extension given his track record.
