U.S. Indexes ended yesterday’s trading session the day in the red, amid broader risk-off sentiment, although sectors closed more mixed. Sentiment was soured through the duration of Tuesday but extended further after the Wall Street Journal reported that mediators see little progress in Iran-US talks, and Iran’s position to end the war has not changed much from earlier iterations that failed to yield progress towards a deal. Following this, the Dollar continued its ascent higher, to the detriment of G10 FX peers, as Antipodeans lagged on the aforementioned risk but also the selling of precious metals. Spot silver saw greater losses than its counterpart. The Canadian Dollar was the relative outperformer, and more-or-less flat versus the US Dollar, despite cooler-than-expected inflation metrics. The Treasury selloff continued as inflation concerns worsen, as the Middle-East conflict drags on. The crude complex was choppy, amid pretty tight ranges by recent standards, but rose to highs on a couple of WSJ reports into settlement. There was no tier 1 US data or Fed speak, as attention turns to FOMC Minutes and Nvidia earnings on Wednesday. Pending Home Sales rose 1.4% M/M in April (exp. 1.3%, prev. 1.5%), with M/M sales rising in the Northeast, Midwest and West, but declining in the South. NAR Chief Economist Dr. Lawrence Yun said that “buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates”. Despite the positive numbers Yun stressed, “Unless supply meaningfully increases, home price growth could outpace wage growth and further erode the homeownership rate. All efforts need to be focused on boosting housing supply.” Energy Markets continued to dictate rates price action as geopolitical uncertainty remained elevated despite President Trump holding off on a planned strike against Iran that was reportedly due to take place on Tuesday. Trump has continued to leave the door open for renewed military action should negotiations fail, warning of “another big hit” if Iran does not agree to a deal. As such, markets likely need to see clearer signs of tangible diplomatic progress before oil prices — and in turn yields — can sustainably move lower. Elsewhere, Fed speak was limited, although President Trump appeared to soften his rhetoric around Fed policy and incoming Chair nominee Warsh. Asked about the recent hawkish repricing in rates markets and whether he expects Warsh to deliver cuts, Trump said he would let Warsh “do what he wants” and that he believes he will “do a good job”. Globally, Canadian inflation data came in softer than expected, contrasting with the recent run of firm US inflation reports. In Japan, Treasury Secretary Bessent spoke with Bank of Japan Governor Ueda and said that excess FX volatility is undesirable, while Japanese Finance Minister Katayama warned authorities remain ready to take decisive FX action, helping support the Yen. Meanwhile, UK labour market data came in soft, while reports suggested Labour’s Burnham would not commit to maintaining existing manifesto tax pledges and had opened the door to future tax increases if he were to become Prime Minister, lending some support to Gilts. Elsewhere, Oil closed flat while Gold ended the day with a 1.8% loss.
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