On Tuesday, the newswires were dominated by the decision made by President Trump, to pull out from the Iran nuclear deal. The US President pulled out of the 2015 deal, which places limits on Iran’s nuclear program in exchange for compromise with the West. Namely, according to Bloomberg, Trump wants to force Iran into a new agreement that will foster peace in the Middle East. As per Kamran Bokhari, senior fellow with the Center for Global Policy in Washington, it is the Iran’s regional influence that the Trump’s administration seeks to roll back and what they have at their disposal as the most appropriate tool is the nuclear deal, however it is not clear how pulling out from the deal would lead them towards accomplishing this goal.
In addition, according to Bloomberg, the European Union is fighting now to keep Iran nuclear deal alive after the exit of President Trump and the line taken is that Donald Trump did not kill the deal, he has just shrank the membership by one. UK, France and Germany have announced yesterday that they will all stick to their commitments, however Iran’s Supreme Leader Ayatollah Ali Khamenei commented that he does not trust these three countries and that he needs practical guarantees, otherwise he believes that they would so the same as the US.
The exit of US from the deal has created confusion with the European investments that have previously been planned, while Western businesses have already been reluctant with regards to investments in the country given the multiple restrictions imposed by Washington. With the announcement followed the fall of Iran’s rial towards record lows, forcing the government to impose currency controls.
Russia stated their disappointment with the US decision to pull out from the deal and is ready to work with the other parties to keep the deal alive, while China has urged all the parties to continue in their efforts to implement the agreement. Hassan Rouhani, Iran’s President stated that his foreign ministry will commence talks with the other parties in coming up with a plan on how to make the deal work.
The full impact on President Trump decision to drop the deal is still unclear and according to analysts from JBC Energy GmbH, it is expected to see a sharp drop in purchases of Iranian crude oil during the next few months, where the US allies in the East Asia are to visibly reduce the Iranian crude oil imports to more than one million.
One the macroeconomic side, yesterday we saw a rose of 0.1% of US producer prices in April, while the expected forecast was 0.2%. the PPI is being closely monitored by the Fed as when the producers pay more for goods, most likely the price increase will be reflected on to the consumer, making PPI a leading indicator of inflation.
Today the most important news releases will come from the UK and the US, with UK trade balance and industrial production, followed by the BoE policy decision and inflation report where no move is expected in policy rates. Later during the day, the US initial jobless claims numbers will be out, as well as the CPI.
ECONOMIC CALENDAR EVENTS FOR MAY 10th
GBP Manufacturing Production m/m
GBP Goods Trade Balance
GBP BOE Inflation Report
GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate
GBP Asset Purchase Facility
GBP MPC Asset Purchase Facility Votes
USD CPI m/m
USD Core CPI m/m
USD Unemployment Claims
