Fundawrap: geopolitics back in vogue, oil above $70 is significant

Besides a rally in oil through $70.00, (highest level since 2014), lifting the benchmarks (energy complex), from a fundamental take at the start of this week, markets are looking for a lead in but with first round of important data/events for April released, eyes are back on trade relations and Iran ahead of the CPI data from the US later in the week.

With oil prices rising, Iran comes to the fore again with respect to Iran nuclear deal. Trump must decide by next weekend, May 12, whether to abandon the deal - a deadline he had set himself. However, Trump said today that he will announce the decision as soon as tomorrow at 1800GMT - (Israel's Channel 10 reported that the US and Europea are close to a deal on Iran). However, should Trump decide to trigger a reimposition of economic sanctions on Iran, hampering oil exports from the country during the driving season in the US, the logical trade is long oil.

Meanwhile, as far as China trade talks went, the team of U.S. negotiators that went to Beijing seem to have come away empty handed. However, China state media indicated that talks were positive, but more negotiations would be needed to avoid a trade war, the South China Morning Post reported. At the same time, officials from Canada, Mexico and the U.S. came together in Washington, D.C., for yet another round of NAFTA talks and observers expect them to reach a deal in principle this month - However, markets expect to see more volatility to come yet.

Elsewhere, following the nonfarm payrolls and recent FOMC outcome, participants still expect between three to four rate hikes from the Fed before 2019 which pushed the euro below the 1.19 handle and the DXY towards the 93 handle on Monday.

Fed members were speaking, with Fed's Barkin, Kaplan and Evans all hitting the wires: 

• Fed's Charles Evans: structural change may create inflation headwinds
• Fed's Barkin: fiscal stimulus has helped lift confidence
• Not seeing outsized wage pressure despite low jobless
• U.S. Plan of tariffs does cause issue with business confidence, nervousness among those firms he speaks to
• Says consumer, business confidence support growth
• Says business confidence has been helped by recent tax cuts and fiscal stimulus

Dallas Fed's Kaplan was speaking on a panel at the financial markets conference at Amelia Island Florida at 3:30 pm et/1930 GMT, however no sound bites reported so far. 

We have also had ECB officials speaking:

• ECB Praet – no evidence of durable softening in demand;
• limited signs strong euro dampening exports;
• says euro area data point towards some moderation, but remain consistent with a solid and broad-based expansion;
• says once the governing council judges that the three criteria for sustained adjustment – convergence, confidence and resilience – have been met, net asset purchases will expire, in line with our guidance;
• says overall, an ample degree of monetary stimulus remains necessary;
• says inflation will probably converge only gradually towards our objective;
• says negative surprise in core inflation is mainly attributable to a decrease in services inflation, which is likely to be related to developments in volatile items, also reflecting the timing of Easter this year.
• ECB' Smets says investors might be right to push back their forecasts for when ECB might increase interest rates for the first time since the financial crisis- WSJ;
• says ECB could perhaps announce decision to gradually phase out its bond-buying program after its July 26 policy meeting;
• says ECB may announce phase-out of QE over summer: WSJ.