Swap Shop

Daily update

US Treasury Secretary Bessent admitted “several” Gulf countries asked the US for dollar swap lines to cover short-term funding needs from the Gulf war. Where travel has collapsed, or where plunging oil and gas volumes are not offset by price effects, near-term economic support is needed. Longer-term reconstruction and rearmament must be paid for. Sovereign wealth funds may be used in the future, but swaps are less disruptive near-term funding. The economic question is whether this dollar income is spent in the US, or whether dollars are sold and the proceeds spent elsewhere.
The recent pontification of ECB speakers signaled no rate increase next week. As chief economist Lane pointed out (with the clarity and insight all chief economists naturally possess) the ECB will not have enough information about the war’s impact. Specifically there can be little visibility of second-round inflation effects this early.
Assorted business sentiment polls are due. Aside from normal quality issues (low response rates, politically inspired answers), the frequently changing tone of US President Trump’s social media posts mean sentiment could alter from one day to another.
UK March public sector borrowing data is due. This is not a major market mover, and UK debt ratios are relatively good by international standards.