Forex analytics. The euro is trapped
Traders have been waiting for news about the de-escalation of the conflict in the Middle East for a long time to buy stock indexes and EURUSD. They followed old patterns, including the markets’ reaction to America’s Liberation Day with its tariffs a year ago. However, in fact, they drove themselves into a trap. The Strait of Hormuz is not open and continues to be controlled by Iran. The opponents accuse each other of violating the ceasefire, and the negotiations between Washington and Tehran do not necessarily have to end in a peace agreement.
A miser pays twice. I don’t even know which is worse, trying to jump into the last carriage of the EURUSD train heading north or being trapped in a premature rally of the main currency pair? Yes, the US dollar is heavily dependent on oil, and their 30-day correlation at arm’s length is approaching the record peak that occurred during the White House’s imposition of the highest tariffs since the 1930s.
However, the fall in Brent in response to the news of the two-week truce between the United States and Iran is deceptive. Investors are looking at a beautiful picture of the futures market, where the North Sea variety is trading below $100 per barrel. In fact, the shortage of black gold has not disappeared. The 10 million bpd that the global economy missed due to the closure of the Strait of Hormuz is still lost. Fewer than a dozen tankers pass through the main oil artery of the planet, compared with 135 before the war.
According to ANZ Research estimates, even the resumption of full-fledged operation of the Strait of Hormuz will allow only 2-3 million bpd to return to the market. It is not surprising that in the markets with immediate supplies of black gold, prices still fluctuate in the range of $140-150 per barrel. Physical failure is an objective reality, and the cost of gas in the United States is not going to fall. According to Gulf Oil, only a WTI peak below $90 per barrel will allow blue fuel to drop below $4 per gallon.
This means that US inflation will continue to accelerate. Even before the armed conflict in the Middle East, the index of personal consumption expenditures increased by 0.4% month-on-month and by 2.8% year-on-year. Wall Street Journal experts expect consumer prices to accelerate by 0.4% mom and 3.3% YoY in March. Such dynamics of indicators will help the Fed to keep the federal funds rate at a high level. The IMF urges other central banks to do the same in order to assess the consequences of the war.
