USD: Ceasefire euphoria faces reckoning
The ceasefire in the Middle East conflict is already showing signs of fragility. Tehran has accused Israel of violations as attacks in Lebanon continue, while vessels are still not passing through the strait – a core condition set by the US. JD Vance is set to lead a delegation to Islamabad, Pakistan, with the first round of talks expected on Saturday. Amid still-elevated uncertainty, markets’ attempt to reverse some of March’s trends proved short-lived, with the dollar paring back losses and oil rebounding to near $96 per barrel. A further leg lower appears unlikely without greater clarity and, more importantly, a mutual understanding and validation of both sides’ demands that would support the reopening of the strait.
USD strength in March was almost entirely war driven. Higher oil prices boosted USD demand through its role in energy invoicing, while broader deleveraging forced heavy USD buying as positions were unwound. Brent spent the latter part of March anchored near 100 dollars a barrel, yet the dollar traded in a broad 99 to 100.500 range as markets embraced the de‑escalation trade, leaving the USD up 2.4% on the month. The setup pointed to headline‑driven swings. There has been a degree of market complacency: Brent was relatively stable after its early‑March surge, failing to break meaningfully above 100 and repeatedly stalling near 110, signalling that the market was unwilling to price a deeper or more durable supply shock. At the same time, the dollar continued to whipsaw on unstable risk appetite and an unclear Fed path. The backdrop hints at the potential for a swift return to a more bearish‑dollar environment should more concrete de‑escalation developments emerge.
A clear break below the 200‑day moving average near 98.500 still looks unwarranted, as evidence of a credible ceasefire and progress toward something more durable are essential before the DXY can embed further bearish momentum.
EUR: Range still in check
The euro jumped on reports of a ceasefire. The currency closed 0.6% higher against the dollar, now sitting about 1% higher so far this month, while still 0.8% lower on a year‑to‑date basis.
EUR/USD has broadly respected its months‑long range, dipping to the second line of support at 1.14 at the peak of conflict escalation in mid‑March. Since then, buying interest has returned around the 1.15 support level, which has been in place since Liberation Day on 2 April 2025. The resilience underscores that 1) the currency has been mostly at the mercy of broader risk‑off sentiment rather than rising oil prices which, capped at $110, failed to deliver a fresh terms‑of‑trade hit for the eurozone. And with risk sentiment fluctuating amid conflicting escalation and de‑escalation signals, there was just not enough bearish momentum to justify a break below 1.14.
As risk‑off waned on ceasefire hopes, a relatively more hawkish ECB still pricing two hikes by year‑end versus the Fed (about a 25% probability of a cut) stepped in too, helping drive a swift move back above the 200‑day MA at 1.1673 before the pair closed just below it.
EUR/USD will continue to parse headlines as investors gain clearer visibility on the ceasefire and on where both sides stand relative to it and to what comes next. Until then, EUR/USD may struggle to hold above 1.17 more comfortably, likely remaining capped by a cluster of dynamic resistances from the 50, 100, and 200‑day moving averages just south of the 1.17 line.
GBP: Relief rally versus rate repricing
As a net energy importer, the UK saw its terms of trade deteriorate sharply during the Middle East conflict, and that became a dominant driver of GBP price action over the past month. But the inflationary spillovers pushed UK breakevens higher and triggered an aggressive hawkish repricing in BoE expectations, from two cuts to almost three hikes, giving sterling a meaningful yield advantage versus many peers.
The ceasefire has now flipped that narrative. Sterling’s initial reaction against the dollar was expected: long‑USD positions were unwound, risk appetite improved and GBP/USD rallied. But the collapse in BoE pricing, from nearly three hikes to just one, is already capping sterling’s performance against other currencies where rate repricing hasn’t been as sharp.
GBP/USD did spike to a one‑month high above 1.34, but the pair remains pinned below its 200‑day moving average, and a sustained break above that level is still needed to re‑establish bullish momentum. One constructive factor is positioning: net GBP shorts remain near record lows as a share of open interest, leaving room for short‑covering if sentiment stays supportive.
Seasonality also leans GBP‑positive as we highlighted in our monthly FX outlook. April has historically been one of the strongest months for GBP/USD, rising in 20 of the past 25 years with an average gain above 1%. But this year’s uncertain macro backdrop – mainly elevated geopolitical risk – may limit the usual seasonal tailwind.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: April 06-10
All times are in GMT
Have a question? [email protected]
*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.
