Iran Deal Points to Steeper Yield Curves: 3-Minutes MLIV

Mark Cudmore analyzes the fallout from the Iran nuclear deal on oil, yields, and currencies. He sees a setup for a dollar-yen pop if the BOJ sounds insufficiently hawkish, persistent oil-driven inflation leading to steeper yield curves, and deep weakness in Hong Kong stocks tied to a struggling Chinese consumer. - BOJ press conference setup favors a dollar-yen rally if the deputy governor fails to deliver a hawkish message. - Lower oil prices have not pulled global yields down because Brent is still well above pre-conflict averages and US stockpiles need refilling. - Oil's supply-side inflation impulse will allow central banks to ease hawkishness at the front end while keeping long-end yields sticky, causing curve steepening. - Hong Kong stocks are underperforming dramatically, signaling significant negativity around China's consumer and a missing wealth effect. - A potential Iran deal encourages risk-on positioning and carry trades, adding pressure on the yen.