Investors are optimistic about a potential ceasefire between the USA and Iran, which could lead to the reopening of the Strait of Hormuz, a critical oil transit route. While oil prices have dipped slightly, they remain elevated, and this optimism has fueled record-high valuations in equity markets. As Wall Street earnings season progresses, the focus will shift to upcoming macroeconomic data, including UK employment figures and U.S. retail sales, which could influence market sentiment and index sustainability.

Key data releases are expected this week, particularly the UK CPI inflation report, which may shape interest rate expectations. The market currently anticipates only a 40% chance of a rate hike by mid-year, a significant drop from earlier estimates. Additionally, Kevin Warsh’s Senate testimony could provide insights into the Federal Reserve’s future direction following Jerome Powell’s departure.

As investor sentiment shifts with geopolitical developments, attention will also turn to gold prices, which are sensitive to Middle Eastern tensions and inflationary risks. The interplay between easing geopolitical fears and monetary policy will be crucial for market dynamics in the coming days.

Source: xtb.com