Macro outlook amid Iran war and monetary policy (with Vonnie Quinn)

Sonja Marten sees markets confused amid Iran war and AI optimism. Dollar direction hinges on escalation: base case EUR/USD 1.20 (weaker USD), escalation 1.10 (stronger USD). Oil up short-term. BOE/ECB to hike, Fed won't cut, testing new chair Warsh. Carry trades risky. No clear bullish conviction on equities.

Yields

NDX

RUT

Oil

Metals

USD

DZ Bank 7.0
Commercial Bank
Sonja Marten 8.0

Macro outlook amid Iran war and monetary policy (with Vonnie Quinn)

dxy

Base case EUR/USD at 1.20 in 12 months (implying dollar weakening), but escalation scenario at 1.10 (dollar strengthening). She provides two scenarios: benign (dollar weaker) and escalation (dollar stronger), indicating uncertainty but a cautious upward bias in an escalation scenario.

2 calls

+2

no reliable edge (random outcomes)

12/8/2025 2:26:21 PM	short term cautious down	6 days later	-1.08%	+0.54%

wti

She mentions oil rising and that emerging markets will be hard hit by oil/gas supply issues, implying upward pressure on oil prices in the near term due to the Iran conflict.

yields

BOE and ECB will hike rates to respond to rising inflation; Fed won't cut rates. Hiking by major central banks implies upward pressure on yields in the medium term.

5 calls

+10

slightly better than random

3/31/2026 10:09:41 AM	medium term up	20 days later	-0.63%	-0.63%
3/31/2026 10:09:41 AM	medium term up	20 days later	-0.63%	-0.63%
12/8/2025 2:26:21 PM	short term up	6 days later	-0.10%	-0.10%
8/25/2025 2:04:17 PM	medium term down	20 days later	-5.26%	+5.26%

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Markets are reacting strangely: equities anemic despite AI earnings, oil rising; what does it mean for the US dollar?

Vonnie Quinn
Sonja Marten

Markets are very confused and trying to find direction; equity markets pushing higher on AI story, but investors may be over-optimistic about the Iran conflict's end and its economic consequences.

Dollar under some upward pressure but moves are moderate; no single story fits all market movements.
BOE Deputy Governor says share prices not consistent with economic pressures; what are major risks for monetary policy? Will BOJ, BOE hike in June?

Vonnie Quinn
Sonja Marten

Monetary policy will take a very different path: BOJ hike expected, BOE and ECB will hike rates to respond to rising inflation and manage inflation expectations; Fed won't cut rates, putting Kevin Warsh in a hot seat.

Fed independence will be tested this year, potentially moving the yield curve.
Would a Kevin Warsh Fed change monetary policy substantially?

Vonnie Quinn
Sonja Marten

Warsh has experience and will be a steady hand, but he can't cut rates in this environment; Trump will pressure him; continuity would be preferred but unlikely; communication will be key to show independence.

It will be a real test for the new Fed chair.
Renewed appeal in carry trade; what happens to Latin American currencies?

Vonnie Quinn
Sonja Marten

Return to carry trades is very risky in this environment; they are short-term and reflect market hunting for yield despite uncertainty; emerging markets, especially in Asia, will be hard hit by oil/gas supply issues.

Nimble feet and strong nerves required; market may be too benign.
Do you have dollar targets in this environment?

Vonnie Quinn
Sonja Marten

We think in scenarios: base case EUR/USD at 1.20 in 12 months; escalation scenario (global recession) at 1.10.

Uncertainty is high; must adjust quickly depending on White House actions.

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