The most important event will be the Fed meeting with Mr. Warsh now in charge

Outlook

This week we get industrial production from the eurozone and the US, already outdated now that everyone assumes the supply chain will be starting up again. Tonight we expect a rate hike from the Bank of Japan, although it’s not clear the dollar/yen will be much affected. Tomorrow it’s the sane and sensible Reserve Bank of Australia, with no change expected.

The Bank of England meets on Thursday, and the consensus is for a hold. ING summarizes:If the deal endures and oil starts flowing again, UK inflation would likely stay below 4% and enable the Bank of England to avoid a rate hike this summer. We expect a 7-2 vote in favour of 'no change' this Thursday.”

The most important event will be the Fed meeting on Tuesday/Wednesday with Mr. Warsh now in charge. As more than one analyst points out, the case for holding rates the same is strengthened by the Iran deal and the prospect of the Strait re-opening, although nobody thinks Warsh can marshall enough doves to do a cut this time.

Forecast

To hell with details: the markets want to believe the war has ended and don’t really much care about who “won” as long as the Strait is re-opened. They don’t even really care whether Iran gets a toll, which has some at other straits licking their chops. Also indifference as to nuclear capability, which is not a factor you can slide into a probability distribution until a bomb actually falls.

This is akin to “buy the rumor.” The Iran deal is not a rumor, exactly, but it’s not a fact, either. As long as Trump can keep the fiction alive that everything going well, risk appetite can con roaring back, lifting equities, casting a pall on commodities lifted by the closing of the Strait, and diminishing the dollar. The Fed press conference will be interesting on Wednesday but despite reams of commentary, the consensus is for no change in the Fed funds rate until closer to year-ed, if then.

It will be some days or weeks before this “deal” unravels and is disclosed to be a total failure for Trump and/or has to be restructured. It might even be the full 60 days after the signing this Friday, assuming that happens. But as time rolls on and bad things don’t happen, risk appetite can grow, and grow like Topsy. The dumping of the dollar will likely move in fits and starts, but dumping it will be.