Firing, not ceasing

Daily update

In the past day, the US fired on Iran, Iran fired on Kuwait, Israel fired on Lebanon, US President Trump threatened to “blow up” Oman. The US administration says the ceasefire (sic) is holding. Market reactions have been negative but muted. Investors are eyeing US domestic political pressures as grounds for expecting a resolution, in spite of Trump’s denials. Trump’s approval rating hit a new low in a recent opinion poll, and the administration is being directly blamed for higher prices.
US personal income and spending data should show consumers continue to absorb the higher oil prices. There is little evidence of cuts in non-oil spending. Instead, spending is maintained via cuts in savings rates, alongside tax rebates. First-quarter US GDP is due for revision, but politically this is becoming divorced from the lived experience. Higher oil prices boost oil exports, but hurt US households.
The April US PCE deflator will reflect higher oil prices. Non-oil prices contain oil components, and the evidence suggests that oil costs are being passed down the supply chain pretty quickly.
There is an enormous list of central bank speakers scheduled for today. Highlights include the Federal Reserve’s Williams, offering a sound economic view; and the ECB’s Schnabel doubtless demanding immediate rate hikes.