Geopolitical Grenades

UK interior minister Amber Rudd resigned on Sunday in a hit to PM Theresa May and the loss of a soft-Brexit supporter. Coupled with positive Korea developments and mixed signals on Iran, that sets up a delicate week. Key US inflation figures follow next alongside personal income and spending. The March core PCE price index is seen at 1.9% from 1.6%.

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The US dollar was the top performer last week while the New Zealand dollar lagged. CFTC positioning data showed a squeeze on the crowded EUR-long trade. Rudd resigned after accusations of mishandling and misleading on immigration. That will make life even more difficult May, who has finally scored a few Brexit wins.

In North Korea, the meeting between Kim and Moon on Friday was a success, at least in terms of the first steps as both promised complete denuclearization of the peninsula. North Korean media said Kum plans to invite foreign observers to oversee the complete dismantling of its nuclear facilities. Many remain skeptical but cautious optimism is creeping in.

A delicate situation remains in Iran where the US must recertify the nuclear deal by May 12. After a meeting with France, Iran was defiant and said it will not renegotiate. European leaders appear to be pushing for the US to maintain the status quo.

In the week ahead, the Iran deal is likely the one that bears the closest watching. It has a firm dealing and several sides who are inflexible.

CFTC Commitments of Traders

EUR +131K vs +151K prior GBP +48K vs +48K prior JPY +1K vs +3K prior CAD -25K vs -30K prior CHF -10K vs -11K prior AUD -3K vs -10K prior NZD +24K vs +27K prior

The euro net long in the prior week hit a record and we warned it was a precarious position. The shorts were squeezed last week in a drop to the lowest since mid-January. Even with the drop, a +131 net is still a very crowded trade that's under pressure.