Signing of Iran MOU Isn't Fully Priced: 3-Minutes MLIV

Summary

Mark Cudmore expects a less hawkish Fed surprise, driving front-end yields lower, the dollar weaker, and near-term stock gains. He sees the Iran deal signing as not fully priced, offering further equity upside, while warning long-end yields may eventually rise as inflation is neglected.

• Fed chair likely to sound less hawkish than extremely hawkish market expectations.
• Front-end rates to fall, dollar to soften, and risk assets to get a short-term boost.
• Yield curve to steepen later as long-end yields stay sticky and drift higher on inflation concerns.
• Stock market near-term momentum positive, though risk-reward is poor and valuations are stretched.
• Iran deal signing is not fully priced; if it proceeds, it will add a small positive impulse to equities.
• A failure of the Iran deal would be a significant negative for risk assets.