The highlight of the session was Trump’s announcement on Truth Social of the lifting of the US naval blockade and a “final determination” on a broader agreement to follow shortly in the White House Situation Room. This gave the positive risk sentiment a further boost, with oil prices extending losses. Iranian sources suggested the public blockade announcement was viewed as the first step in a wider framework that could eventually address regional security issues, sanctions, and future discussions on Iran’s nuclear program.
Iranian sources pushed back on Trump’s characterization of the talks though. Sources cited by Iran’s Fars News Agency described Trump’s statements as a mixture of “truth and falsehood,” denied claims regarding the dismantling of Iran’s nuclear material, and insisted that no final agreement has been approved. Tehran reportedly maintains that discussions remain focused on ending the conflict and lifting the blockade, while key issues such as frozen Iranian assets, sanctions relief, and broader political conditions remain unresolved.
Later reports indicated that Trump’s nearly two-hour Situation Room meeting ended without a final decision on a new agreement. According to US officials, the administration believes it is close to a deal, but significant sticking points remain, particularly regarding the unfreezing of Iranian funds and the sequencing of commitments by both sides. As a result, while markets interpreted the developments as a sign of diplomatic progress, negotiations continue and a formal agreement has yet to be finalized by either Washington or Tehran. Despite the noise, the constant push towards a deal continues to keep the markets supported.
Federal Reserve officials collectively reinforced a cautious and generally neutral policy stance, emphasizing that inflation remains above target and that current interest-rate setting remains appropriate. Fed’s Bowman warned that progress on disinflation has stalled and said an extended Middle East-driven energy shock could add to inflation pressures later this year, though she argued against overreacting to temporary price spikes.
Fed’s Paulson similarly stated that inflation was too high even before the recent geopolitical tensions, supported holding rates at mildly restrictive levels, and said it was healthy for markets to shift toward a tighter-for-longer policy outlook. Meanwhile, Fed’s Daly expressed confidence that monetary policy is well positioned to restore price stability without unnecessarily harming the economy, while highlighting the potential for AI-driven productivity gains to support growth and ease long-run inflationary pressures.
On the economic data side, Germany’s headline CPI slowed to 2.6% on easing energy prices, but core inflation rose to 2.5% vs 2.3% in the prior month. Canada’s GDP grew just 0.1% in the first quarter, well below the 1.5% consensus forecast. The Canadian data has been consistently surprising to the downside lately which makes the market’s BoC rate hike expectations look off.
In the US, trade and inventory data were more encouraging. The April advanced goods trade deficit narrowed to $82.4 billion from the expected $86.5 billion, suggesting net exports could provide a more favorable contribution to second-quarter GDP than previously anticipated. Meanwhile, wholesale inventories rose 0.5%, below the 0.8% forecast.
Have a great weekend!
