Credit Ágricole: FX Risk
Central bank rate hikes in the past two weeks have not daunted investors. The fall in oil prices is reducing the pressure on central banks to keep raising rates which is capping the rise in the global yields. There are two sources of the fall in oil prices. First, Saudi Arabia is restarting its East-West pipeline, which bypasses the Strait of Hormuz. Saudi Arabia expects the pipeline to be at 40% of its capacity in the coming days. A full restart will take 6-8 weeks. Second, hopes are rising of a diplomatic end to the US-lran war as diplomatic efforts pick up around the UN General Assembly (UNGA). President Donald Trump said he is "probably" open to a meeting with Iranian President Masoud Pezeshkian, on the sidelines of the UNGA. US envoys Steve Witkoff and Jared Kushner have already met with an Iranian delegation, and the US administration described the meeting as going "very well" and pointed to the possibility of another meeting in the “very near future." The UNGA could disappoint investors, however. Currently, there is no meeting scheduled between Trump and Pezeshkian. Trump also continues threatening to annihilate Iran unless a deal is done, a tactic that has failed to move th
Central bank rate hikes in the past two weeks have not daunted investors. The fall in oil prices is reducing the pressure on central banks to keep raising rates which is capping the rise in the global yields. There are two sources of the fall in oil prices. First, Saudi Arabia is restarting its East-West pipeline, which bypasses the Strait of Hormuz.
Saudi Arabia expects the pipeline to be at 40% of its capacity in the coming days. A full restart will take 6-8 weeks. Second, hopes are rising of a diplomatic end to the US-lran war as diplomatic efforts pick up around the UN General Assembly (UNGA). President Donald Trump said he is "probably" open to a meeting with Iranian President Masoud Pezeshkian, on the sidelines of the UNGA.
" The UNGA could disappoint investors, however. Currently, there is no meeting scheduled between Trump and Pezeshkian. Trump also continues threatening to annihilate Iran unless a deal is done, a tactic that has failed to move the Iranians in the past. Investors will therefore continue watching events in New York and oil prices.
The meeting between Presidents Trump and Xi Jinping later this week will also occupy investors' attention. While unlikely, an agreement to slow the progress in AI could hurt technology stocks. But Trump has already told the UNGA that he does not intend to slow the progress of AI on the back of safety concerns. Investors also expect Trump and Xi to extend their trade truce, which would be supportive of sentiment.
Among G10 currencies, only the CHF, CAD and SEK have significant positive correlations with our Risk Index. The GBP, USD and NOK have significant negative correlations with the Index.