US-Iran Truce Holds for NowIt has been quite the week, with the market’s key narrative centred on the signing of the US-Iran peace agreement and the reopening of the Strait of Hormuz. While a move towards peace is always welcome and oil benchmarks have pulled back to around US$80/barrel, there are still many uncertainties. While writing, I saw the IDF struck Hezbollah targets in Lebanon; therefore, this situation will need to be ironed out, as it forms part of the MoU. Another concern, of course, is how quickly oil will begin flowing again and whether Tehran will pursue a tolling system for vessels transiting the Strait. Markets: Equities Tentative and USD BidIn the equities space, Asia-Pacific shares ended Friday off their best levels, with Japan’s Nikkei 225 and South Korea’s KOSPI retreating from record highs. US equity index futures are also lower across the board this morning, with European stock futures also modestly on the back foot.For FX, the USD is on a tear right now, following the Fed’s hawkish tone at Wednesday’s meeting, with markets almost fully pricing in a Fed rate hike as soon as October (+22 bps). This has also weighed heavily on the likes of the EUR and GBP, with both currencies not far from their March lows. The USD/JPY has also surged higher, touching levels just south of ¥162. This leaves Japan’s MoF in a very uncomfortable position: intervene to fight sentiment or watch the JPY move lower.US Treasury yields bear-flattened as traders price in a more aggressive Fed tightening. The hawkish repricing of the Fed is moving currency and rates markets more right now than the Iran de-escalation is.Here in the UK, as expected, Andy Burnham’s win in the Makerfield by-election has opened the door to a challenge to PM Starmer. Because the win was widely anticipated, Gilt yields have been relatively tame, though the underlying risk premium remains elevated. We need to see Burnham’s policy before the bond markets react, though he has already committed to the fiscal rules.BoE Holds the LineIn an expected 7-2 MPC vote split – with Megan Greene joining Chief Economist Huw Pill in opting to hike rates immediately by 25 bps to 4.00% – the BoE kept the bank rate at 3.75%. Without a press conference or any updated economic estimates, the meeting was a relatively tame affair, with markets largely overlooking it.The decision followed softer UK May CPI inflation numbers and a modest April UK jobs report, as well as the US and Iran putting pen to paper to sign an interim peace agreement.Ultimately, the message I took away from the event was that, unless the US and Iran resume hostilities, the bar for hiking the bank rate is high now. This is despite markets pricing in 30 bps of BoE tightening by year-end. This pricing could unwind in the near future, and with the Fed adopting a more hawkish stance, this mismatch should weigh on GBP/USD. However, because the BoE appears to be done with hikes, but rate cuts are not yet on the table, any medium-term downside for GBP/USD will likely be a gradual, grinding move rather than a sharp sell-off.US Labour Market Is Still FirmIn the US, weekly jobless claims for the week ending 13 June came in at 226,000, down from the prior week’s revised level of 230,000. Continuing claims (week ending 6 June) rose modestly by 24,000 to 1,810,000. On the face of it, unemployment claims remain stable, reaffirming a resilient jobs market and underpinning new Fed Chairman Kevin Warsh’s comments at Wednesday’s press conference that he thought the labour market was stable. This also follows the US economy adding 172,000 jobs in May, with the unemployment rate remaining at 4.3% for three straight months.Today’s calendar is thin, with the US closing its doors in observance of Juneteenth National Independence Day.Have a great weekend!