So, risks are tilted both ways, pricewise, as investors continue to react strongly to Donald Trump’s peace hopes. But concretely, Washington’s peace promises have been unfounded since the beginning of this war, and there is no guarantee that the current diplomacy will lead to any kind of lasting peace.

Spot prices are rising faster than futures, hinting that investors are back to trading worries about tighter short-term oil supply due to a prolonged closure of the Strait of Hormuz, while traffic across the Red Sea is also being threatened by Houthi attacks. On the other hand, a credible reopening of the Strait, a peace deal and/or further promises from Washington could knock a lot of premium out of the front end very quickly.

Uncertainty in the Middle East and the rebound in oil prices, leading to a rebound in global yields, are weighing on indices near record-high levels. US and European indices stagnated near ATHs yesterday, as Nvidia’s fresh $500bn funding package from Wall Street heavyweights reignited worries about circular deals, outweighing the 45% sales surge announced by TSMC. Remember, Nvidia has recently been in talks to guarantee financing for a quarter-trillion-dollar AI data centre for OpenAI, one of its biggest customers.

We don’t yet know if yesterday’s $500bn funding announcement is part of this $500bn financing, but the fact that Nvidia is securing fresh funding to invest in its own clients, so that they can continue to buy chips from it, means that the AI money will continue to turn round and round among a number of AI buddies.

The risk of a domino effect if something goes wrong at one of the companies in the chain is something investors cannot ignore. This is why Nvidia saw its stock price fall 2.86% on the news yesterday. A broader benchmark for US chipmakers fell more than 2%.

The memory-chipmaker-heavy Kospi is up this morning on news that Samsung is considering a massive shareholder return package. But dip buyers may remain timid following a sharp correction between June and July.

Broadly, for the Korean memory chipmakers, the past year’s chip mania could well be over, even though Korean chipmakers will continue to benefit from the massive AI buildout and the two Korean giants – Samsung and SK Hynix – have seen their forward PE ratios fall to around 5x.

Cheap valuations don’t guarantee the immediate return of the speculative positions that made these traditionally boring stocks the hottest commodities for months. On the contrary, a further downside correction is more likely to be on the menu if speculative bulls refuse to join in. Affair to be followed.

RBA maintains rates unchanged

Moving on to the macro picture: the Reserve Bank of Australia (RBA) maintained rates unchanged, as widely expected today, pointing to rising unemployment and a weak property market. The AUDUSD eased below its 100-DMA.

The US dollar index is consolidating its recent weakness near its own 100-DMA. The rebound in oil prices and yields is supportive of a stronger US dollar, while waning confidence in the Federal Reserve’s (Fed) intention to bring inflation towards its 2% policy target is bringing the ‘sell America’ trade back to the table.

That is especially visible in gold’s rise alongside oil and US yields. The price of an ounce shot above the $4’400 level yesterday. We are well below the $5’600 reached at the January peak, but the longer-term fundamentals remain supportive for the yellow metal: geopolitical uncertainties, trade uncertainties, exploding DM debt levels and weakened appetite for the US dollar and US Treasuries.

Note that the inability to contain the yen’s weakness against the dollar is also a risk for US Treasury yields – one reason why the US is so involved in efforts to stop the yen’s depreciation beyond the 160 level. Japan is one of the world’s largest holders of US Treasuries, and intervention to support a weakening yen could, in theory, involve selling Treasury assets, applying additional pressure on US yields. As such, the USDJPY approaching 160 again following a short-lived intervention relief is not good news for the global macro picture.

Expect caution ahead of US CPI release

Today, the cautious mood will likely remain in play, as investors stay on the sidelines before tomorrow’s closely monitored US CPI update.

Last Friday’s soft US jobs report softened hawkish Fed bets, but there is a growing worry for global macro investors today: the possibility that the new Fed Chair, Kevin Warsh, will indeed be a ‘sock puppet’ of the White House, and that his first few weeks in office were just a temporary show of independence from the Big Boss.

Warsh is seemingly on his way to making the Fed an obscure room where economic policy will be mixed and matched with the White House’s political ambitions – a development that also largely explains the returning appetite for gold at the expense of the US dollar.

But even though Warsh is becoming more elusive regarding the Fed’s reaction function in the face of rising inflation, he is smart enough to know that losing credibility and the market’s support would make his policy decisions less effective – to the extent of making them totally meaningless.

Therefore, US data matters even more as the Fed becomes more opaque, as the market will have to do the heavy lifting in the absence of clear Fed guidance. Stronger-than-expected inflation would push yields higher and weigh on risk appetite, while benign numbers could soften hawkish bets without fully taming them, as oil prices continue to surge – whatever the Fed will do with its rates. At the end of the day, the markets – not the Fed – decide where borrowing costs should be.

Those wondering what happens when the Fed resists adjusting policy rates in line with economic fundamentals to please politicians – who simply want lower rates – need only look at Japan and Turkey to understand how poorly managed monetary policy can pressure currencies and ultimately sicken economies.