The highlight of the session was Trump’s announcement on Truth Social that the US naval blockade would be lifted and a “final decision” on a broader agreement would soon follow in the White House Situation Room. This has given an additional boost to positive risk sentiment, with oil prices continuing to see losses. Iranian sources indicated that the general blockade announcement is seen as a first step in a broader framework that could ultimately address issues of regional security, sanctions, and future discussions about Iran’s nuclear program.
But Iranian sources responded to Trump’s characterization of the talks. Sources reported by the Iranian Fars News Agency described Trump’s statements as a mixture of “truth and falsehood”, denied the allegations related to the dismantling of Iranian nuclear materials, and insisted that no final agreement had been approved. Tehran reportedly maintains that discussions remain focused on ending the conflict and lifting the blockade, while key issues such as frozen Iranian assets, sanctions relief, and broader political circumstances remain unresolved.
Later reports indicated that Trump’s nearly two-hour Situation Room meeting ended without a final decision being made on a new agreement. According to US officials, the administration believes it is close to reaching an agreement, but there are still major sticking points, especially regarding the release of frozen Iranian funds and the sequence of commitments by both sides. As a result, while markets interpreted the developments as a sign of diplomatic progress, negotiations are ongoing and a formal agreement has yet to be finalized by either Washington or Tehran. Despite the hype, the ongoing push for a deal continues to keep markets supported.
Fed officials have collectively reinforced a generally dovish and neutral policy stance, emphasizing that inflation remains above target and that current interest rate setting remains appropriate. The Fed’s Bowman warned that progress on fighting inflation had stalled and said a prolonged energy shock in the Middle East could increase inflation pressures later this year, although she argued against overreacting to temporary price spikes.
Likewise, the Fed’s Paulson noted that inflation was very high even before the recent geopolitical tensions, supported keeping interest rates at fairly restrictive levels, and said it was good for markets to shift toward tighter policy expectations for longer. Meanwhile, the Fed’s Daly expressed confidence that monetary policy is well-positioned to restore price stability without unnecessarily hurting the economy, while highlighting the potential for AI-driven productivity gains to support growth and ease longer-term inflationary pressures.
In terms of economic data, Germany’s headline CPI slowed to 2.6% due to easing energy prices, but core inflation rose to 2.5% compared to 2.3% in the previous month. Canadian GDP grew just 0.1% in the first quarter, well below the expected 1.5% forecast. Canadian data has been consistently surprising to the downside lately, making rate hike expectations from the Bank of Canada look far-fetched.
In the United States, trade and inventory data were more encouraging. The advanced goods trade deficit narrowed in April to $82.4 billion from $86.5 billion expected, suggesting that net exports could provide a more positive contribution to GDP in the second quarter than previously expected. Meanwhile, wholesale inventories rose 0.5%, below expectations of 0.8%.
Have a great weekend!
