27th May - "Great Deal for all or, no Deal at all"

Geopolitics

The negotiations in Iran continued, but we also saw some contradictory posts and concerning news that have dampened optimism of an imminent deal. President Trump posted that negotiations are "proceeding nicely", then also commented "It will only be a Great Deal for all or, no Deal at all". Secretary of State Marco Rubio has also commented that any deal would take several days to complete, as there are still unresolved issues to be discussed.

Further to this, there were claims from the IRGC that they had targeted an F-35 fighter jet over Iranian airspace. Whether the claim is exaggerated or even true is up for debate, but the willingness of the Iranians to announce this is another sign that while talks are still taking place there is not a clear conclusion as of yet. Trump will meet his cabinet in Camp David today, possibly to make key strategic decisions when it comes to the negotiations with Iran. Any news from this meeting may set the tone for the next few days.

Forex

Most currencies were relatively quiet yesterday, with markets waiting on the outcome of the US-Iran talks. The USD gained some ground on the day after the uncertainty around peace talks, with the DXY moving back above 99.000. The GBP was the clearest underperformer against the USD, falling 0.42% on the day and giving back all of its gains from the start of the week. This was likely caused by the relative strength of the USD and the continued political uncertainty in the UK. The fundamental case for the GBP is relatively weak in the longer term, so there is a likelihood that weakness against the USD will continue in the medium term at least.

GBP/USD

The EUR was positive against most currencies outside of the USD, backed by recent hawkish language from the ECB about interest rate rises. It is still hampered by energy price sensitivity, meaning that whilst oil has been falling over the past few days, until we see a sustained fall towards past prices the EUR will continue to struggle against the USD. CHF had a weak day yesterday, as some of the safe-haven demand continued to fall away thanks to the US-Iran talks. Whilst the USD has the rate hike narrative and rate differentials in its favour, the CHF has neither of these. As a result, whilst the USD has also been affected by some removal of safe-haven demand over the past week, yesterday's mix of good and bad news meant any safe-haven demand on the day went to the USD instead of the CHF.

USD/CHF

CPI prints for the AUD were weak this morning, coming in below expectations and putting downward pressure on the AUD. The RBA had been hawkish over the course of the year so far, giving strong backing to the AUD and leading to a very strong 2026 so far. This lower than expected print could slow that momentum, it will be key to monitor the RBA's statements over the next days and weeks to see if there is any change in tone.

The RBNZ kept interest rates the same in New Zealand overnight at 2.25%, but crucially the vote to decide this plus comments after were far more hawkish than expected. There had been an expectation that there would be a unanimous vote to hold rates, but in the end it was a split 3-3 decision between holding and raising rates. Only Governor Breman's casting vote broke the deadlock in favour of holding at 2.25%. The commentary after the decision was also very hawkish, blaming the Iran conflict for higher inflation and all but confirming that a rate hike would come later this year. The OCR projection for the NZD rose to 2.51% in Sep 2026 and then 3.07% for Jun 2027, meaning that markets are now predicting that there will be multiple rate hikes over the next 12 months to leave us around 3% by this time next year. This is a meaningful shift from the previous prediction of 2.62%, one that will affect the NZD for the long term. This will be one to watch over the next few days and weeks as it is likely to significantly affect the NZD basket moving forward.

AUD/NZD

Indices

Indices saw another interesting shift yesterday, the Dow fell away from its highs whilst the Nasdaq broke new ground and the S&P500 fell a little. This is another interesting wrinkle, after the Dow outperformed yesterday. This is likely explained by Micron seeing its stock price soar by 19% on the day, as it is part of both the Nasdaq and S&P500 these both felt the benefits of the move. The Dow's pullback may have been due to the uncertainty around Iran, but could also have simply been profit taking after it broke through all time highs. The remainder of the week will be able to tell us if it was a one session hiccup or a longer pullback.

The fact that one company's stock price can have such a large effect on the Nasdaq and S&P500 is further evidence of the 'narrow leadership' dynamic we have seen at play recently, where a small number of huge tech companies have an exaggerated effect on the two indices as a whole. It is a concern, for me at least, as it leaves the two markets at a far greater risk if these companies begin to struggle. Considering almost all of the companies leading the way are in the tech or AI space, it further reinforces the concerns that an AI bubble burst will have a significant impact on the entire market.

Dow Jones

Precious Metals

Gold and Silver both fell yesterday on the news from Iran, as they continue to be affected by the rate hike narrative surrounding the energy shock caused by the conflict. The normal safe-haven mechanism for the precious metals can now be completely discounted whilst the war is affecting energy prices. This will return in the future and is not to be discounted, but whilst the event causing safe-haven demand is also causing inflation, it is something we can ignore for the time being. The key factor is interest rate expectations, which will likely not be reduced for some time. The length of the energy shock has meant inflation is being baked into economies, rather than being a surface level and temporary wave. As a result I think we can expect to see precious metals lower for longer, at least until the effects of the Iran war have made their way through the system and inflation begins to fall.

Gold (XAU/USD)

Today's Key Market Drivers

• Iran - Until an agreement is finally reached, this will be the main driver every day and will have any outsized effect on all markets.

• Trump's Camp David Meeting - This will directly affect the Iran situation and so by extension all markets, news from the meeting will be key

• RBNZ Meeting Fallout - This will continue to affect the NZD through the day as markets digest the change in guidance. We can expect to se NZD strength, but the quesiton is how much