• Meanwhile in markets, equities and bonds are treading water as everyone awaits US-Iran talks which still are not certain to take place at all. With President Trump’s deal or bombs ultimatum looming tomorrow, is a breakthrough in the negotiations just around the corner?

• For there to be a breakthrough, the Iranians first have to show up. If only Trump’s henchmen Kushner and Wittkoff sit across the table in Islamabad tomorrow, the Iranians will surely stay home. They want Vice President JD Vance – reportedly the only ranking war sceptic in the White House –  in the room and I can’t blame them. The talks are also trapped in a catch-22: Tehran doesn’t want to talk while their ports are under a US naval blockade, but President Trump has vowed the blockade won't budge until a deal is signed. It’s a high-stakes game of chicken, but I expect a last-minute return to talks. We are already seeing some movement: in a likely sign of goodwill three ships – including an Iranian vessel – passed through the Strait of Hormuz this morning;

• The biggest sticking point in any negotiations are on the nuclear front. Iran seems willing to trade uranium enrichment ambitions for concessions – but certainly don’t expect a total white flag. A permanent end to its nuclear enrichment remains a non-starter. US negotiators are reportedly floating a 20-year enrichment moratorium. Iranians reportedly countered with a shorter moratorium and that future enrichment to a certain level is done in a consortium;

• At the same time President Trump still publicly demands total dismantlement of all of Iran’s nuclear capabilities. That maximalist line is unlikely to hold. I don’t see the US settling for a moratorium shorter than 10 years, given that was the length of the pause on enrichment under President Obama’s Iran deal (JCPOA). After all, Trump branded the JCPOA “the worst deal ever negotiated.” The greatest dealmaker who ever lived of all time can’t come away with less;

• The nuclear issue is not just about future of nuclear enrichment, but also what happens to the enriched material already underground – especially the 440 kg of highly 60 percent enriched uranium. The US wants all of it removed from Iran, ideally transporting the stockpile to the US. Iran, by contrast, would be open to downblend (reduce the enrichment level of) its highly enriched uranium domestically;

• Beyond the nuclear aspects, Tehran is holding out for complete sanctions relief, reparation payments, security guarantees and continued control over the Strait of Hormuz through a toll system. Trump initially toyed with joint tolls – but allies have since moved the US back to a free and open Hormuz policy. Curiously, ballistic missile limits have reportedly vanished from the public discourse since the ceasefire. Possibly, the US could count the destruction of ballistic missile infrastructure as a win in the same way it frames the regime change as a success. Lastly, on Iranian proxy groups such as Hamas and Hezbollah, the US has claimed that Iran would end all support – an assertion Tehran firmly rejected;

• Given the stark contrast in positions, a full deal tomorrow appears impossible short of a capitulation by one side. Instead, a memorandum of understanding is the most likely outcome –extending the ceasefire as negotiations continue to close the differences. Earlier reports suggested a deal would take around six months to be reached;

• Shifting to broader markets, equities do not reveal any substantial fears of a return to a shooting war in the Middle East. The Stoxx 50 and S&P 500 futures are marginally up this morning, with the latter a quarter of a percent below its all-time high this morning. Bund and US Treasury yields are largely flat throughout the session. Brent crude has been oscillating around the $95 a barrel mark throughout the morning;

• Looking ahead, we have the release of US March retail sales on tap this afternoon. Besides that we also have a speaking engagement from Swiss National Bank’s Petra Tschudin, who is likely to push back on the franc’s recent strength and reiterate the higher willingness  of currency intervention. Tomorrow will be another day of Iran headline watching. Reports are that US–Iran talks will start tomorrow morning, which would make it a very tight squeeze with Trump’s deadline for deal set at 10:00 AM local time (06:00 CET). Alongside Iran headline watching we have a heavy slate of ECB-speakers lined up. Messaging should continue to push a hold for April, as we erase the remaining 3bps of ESTR forward hikes still priced in.

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