UKRAINE: FT-Putin & Zelenskyy Cool On Peace Talks

The breakdown of U.S.-Iran negotiations has pushed oil higher vs. Friday’s closing levels, pressuring gilts.

• Reports have pointed to mediators continuing to eye opportunities to bridge gaps between the two sides in a bid to end the conflict, while the WSJ reported that the Trump administration is currently weighing limited strikes on Iran in a bid to force the country back to the negotiating table.
• Gilt futures trade as low as 88.08, with bears still unable to close Thursday’s opening gap higher (88.03). A break below that level would expose key near-term support at 87.59.
• Yields ~3bp higher across the curve. Bulls have been unable to force conclusive breaks back below the March 18 yields lows, leaving bears in technical control despite the recent recovery.
• SONIA futures off lows, last 0.5-6.0 weaker on the day, while BoE-dated OIS prices ~47.5bp of hikes through year end vs. ~45bp late on Friday.
• Expect geopolitical tensions to continue to dominate in the immediate term.
• The impact of the war in the Middle East was not too evident in the KPMG-REC Report on Jobs that was released overnight. Note that data was collected 12-25 March.
• UK monthly GDP data is due on Thursday, but that shouldn’t be a meaningful market mover, particularly as it covers the pre-Iran escalation period (February).
• Elsewhere, 6 MPC members will speak this week, including Governor Bailey.

• The US dollar trades with a positive tone to start the week, as the negative impulse from the failed talks in the Middle East dents risk sentiment and fosters some safe haven demand for the greenback. With that said, the impact on FX markets has once again been limited, with the DXY just 0.3% higher on the session as questions remain regarding Trump’s intention to place a blockade on the Strait of Hormuz.
• This is translating to moderate declines for the majors, as the likes of EUR, JPY and GBP trade in line with broader dollar sentiment. For EURUSD, last week’s rally fell just shy of Fibonacci resistance at 1.1746 and spot has traded back below 1.17 on Monday, keeping the bearish medium-term trend intact for now.
• USDJPY trades just 25 pips shy of the psychological 160.00 mark again, keeping the Mar 30 high and bull trigger of 160.46 in focus. Core fixed income dynamics continue to place pressure on the yen, especially as the market may be questioning the short-term hiking trajectory for the BOJ, who meet on April 28. Offsetting this narrative are the lingering concerns of investors surrounding MoF intervention.
• Last Friday saw a fresh cycle high for EURJPY by 1 pip at 186.88. A sustained break above the January highs and a key medium-term resistance would confirm a resumption of the technical uptrend.
• NOKSEK has rallied well amid the higher oil prices and risk off, while a Norwegian wage norm agreement also keeps upside potential in wage growth to Norges Bank projections, and keeps a May Norges Bank hike in play.
• In emerging markets, EURHUF is trading at its lowest level since 2022 as the scale of Tisza party's victory alongside Viktor Orban’s swift and notably measured concession has underpinned this morning’s rally in Hungarian assets.
• Canada building permits, US home sales are scheduled in today's light data calendar. ECB's Guindos, BoE's Taylor, RBA's Hauser and Fed's Miran will speak.