USD: Dollar backs off as energy risks persist
Recent US macro reports provided a mixed but resilient economic backdrop. March ADP Employment Change printed at 62k, beating the 40k consensus estimate but still representing a slight deceleration from the prior month’s revised 66k, reinforcing a gradual cooling in labor demand that was already underway on the eve of the US‑Israeli attack on Iran. At the same time, consumer spending and sentiment showed unexpected strength. February Retail Sales advanced 0.6% month-over-month (above the 0.5% estimate), and Retail Sales Ex Auto similarly beat expectations by rising 0.5%. This robust spending data aligns with consumer confidence surprising to the upside, with the Conference Board index rising to 91.8 in March. The macro tone has been stable enough, but international headlines and geopolitics still are in control of the narrative.
Geopolitics dominated price action. Reports indicated Iran’s president signaled a willingness to end the war contingent on guarantees against future aggression, while President Trump publicly pressed other countries to take responsibility for securing the Strait of Hormuz. Iran has maintained similar demands throughout the conflict, so little of this is strictly new; the strong market reaction instead underscored how eager investors are for a path to de‑escalation and, arguably, a cleaner quarter‑end.
The S&P 500 jumped 2.65%, with the Nasdaq 100 and S&P 500 notching their best sessions since May 12, 2025. Brent fell about 2.5%, while WTI remained above $100 per barrel, making the equity move larger than what the oil decline alone would imply. The scale of the rally suggests investors are leaning hard into de‑escalation risk, not merely responding to energy beta.
In FX, after five consecutive up sessions and a test of its highest level since May 2025, the greenback slipped roughly 1% between yesterday and today’s session, even as WTI stays close $100. That reversal points to an unwind of safe‑haven flows and position‑squaring into quarter‑end, and it is an important barometer of how credibly markets view a potential diplomatic off‑ramp. FX looks like the cleaner tell from here, sustained Dollar softness alongside firm energy would corroborate a risk‑friendly shift, while a Dollar snapback would warn that the de‑escalation trade is over‑extended.
On the ground, however, little has materially changed. Energy is not flowing freely through the Strait of Hormuz, and strikes continue across the region, including a recent attack on a Kuwaiti oil tanker. Yes, markets are forward looking, but they have also showed their predisposition to get way ahead of themselves, trading on hope rather than hard improvements in physical flows. Until shipping normalizes and regional violence meaningfully recedes, the equity move looks ahead of fundamentals.
The next checkpoints are straightforward. First, we’ll stay keeping an eye on hard confirmation of ceasefire guarantees and operational proof in restored shipping, normalized insurance, and lower war‑risk premia. Also, we’ll see whether the roughly 1% pullback extends (validating risk‑on) or reverses (flagging vulnerability). Finally, we’ll keep monitoring energy‑risk alignment: can equities remain buoyant if WTI stays above $100 and Strait risk persists?
EUR: Real rates are a warning signal
The euro rallied nearly 0.8% against the dollar yesterday, helped by hopes of a potential de‑escalation in Iran and a sharp upside surprise in Eurozone inflation — the steepest monthly jump since 2022. This data backed expectations that the European Central Bank (ECB) will have to raise interest rates, but the euro is at risk if the ECB doesn’t go ahead.
The rise in nominal euro rates has barely kept pace with the surge in inflation expectations, meaning the 10‑year real rate differential has actually moved against EUR/USD. If the ECB opts against a hike in April while inflation expectations stay elevated, that mix turns euro‑negative. In short, persistently high energy prices and an ECB unwilling to tighten leave EUR/USD vulnerable to a move toward the 1.12 area.
EUR/USD closed March between 1.15 and 1.16 after dipping to 1.1411 earlier in the month. But with the pair starting March near 1.18, the monthly drop of more than 2% was its worst since July and extends the drawdown from the 2026 peak to 4%. Despite yesterday’s bounce, EUR/USD remains locked in a short‑term downtrend, with the 50‑week moving average continuing to cap the topside.
CAD: Slight reprieve
While weak domestic fundamentals continue to overshadow the rebound in oil and gas, the USD/CAD rally is seeing a slight reprieve after a dominant run. Following seven consecutive upward sessions that propelled the pair from the 1.36s to a recent peak of 1.3945, the pair is currently trading lower at 1.3887.
As the US Dollar takes a pause at these key resistance levels, any further push toward 1.40 will likely be dictated by geopolitical headlines, Middle East tensions and US Dollar’s direction. From a technical standpoint, the pair remains well-supported above its major moving averages, specifically the 200-day SMA (1.3809) and the 100-day SMA (1.3776), both of which reinforce the broader upward trend despite the current intraday cooling.
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
