- Ceasefire optimism remains fragile, with US‑Iran talks offering tentative hope while unresolved risks around Lebanon, Israeli strikes, and the continued US military presence keep markets wary.
- Energy markets remain the main transmission channel, as restrictions in the Strait of Hormuz push oil back toward $100 per barrel, leaving WTI under pressure and amplifying global inflation risks.
- Sterling’s relief rally is constrained, with GBP initially benefiting from improved risk sentiment and long‑USD unwinds, but facing headwinds as aggressive BoE rate‑hike repricing quickly reverses.
- CAD lags broader risk relief, as USD/CAD breaks its range but downside momentum remains limited by falling oil prices, cautious positioning, and weak domestic Canadian fundamentals.
Markets jittery as ceasefire remains fragile
The ceasefire remains fragile. The White House has announced that the US will enter direct talks with Iran, a move that could signal a meaningful shift in regional dynamics. While there have been no recent reports of strikes involving Arab Gulf nations, the backdrop is still extremely tense. Lebanon remains a major obstacle to progress, and Iran has made clear that continued Israeli strikes would render any negotiations pointless. Adding to the complexity, President Donald Trump confirmed that US military personnel will remain deployed around Iran until a durable ceasefire is firmly in place.
The geopolitical strains are rippling directly through global energy markets, with the Strait of Hormuz firmly in focus. The critical waterway remains effectively closed, as Iran requires military approval for ships to pass through. Sultan Al Jaber, CEO of Abu Dhabi National Oil Co., sharply criticized the policy, arguing that conditional access amounts to control in disguise. He called for the strait to be reopened fully and unconditionally to safeguard global energy flows. Against this backdrop, oil has climbed back toward $100 a barrel, while the US DXY dollar index is largely unchanged on the day.
Back in the US, a fresh batch of economic data adds to the mixed sentiment in an already unsettled global picture. The latest figures confirmed a miss in economic growth, with fourth-quarter GDP revised to an annualized 0.5%, below the 0.7% previously posted. While this data may feel backward-looking given the strong macro signals at the start of 2026, it underscores just how much momentum faded late in 2025. The labor market is also showing mild signs of softening, with initial jobless claims rising to 219,000, above forecasts. At the same time, personal income unexpectedly fell 0.1% in February, even as consumer spending expanded at a slightly slower pace than anticipated.
Taken together, these mixed signals leave the Federal Reserve in an increasingly awkward position. FOMC members are weighing upside inflation risks against the possibility that overseas tensions could spill over into weaker labor market conditions. Core PCE inflation holding steady at 3.0% year over year reinforces concerns that price pressures remain stubborn. With growth cooling and inflation risks amplified by energy disruptions abroad, the Fed’s policy options appear increasingly constrained.
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.
CAD: Breaks range as CAD lags risk relief
USD/CAD is currently trading near 1.383, after breaking out of a tight consolidation range that had held for three sessions prior to confirmation of the Iran ceasefire. Ahead of the announcement, the pair was locked between roughly 1.389 and 1.393, reflecting headline risk and position-squaring rather than conviction. The ceasefire triggered a clear relief move lower in USD/CAD as broader risk sentiment improved and the USD weakened across G10.
That said, the follow‑through in CAD has been not as strong relative to higher‑beta peers, consistent with the FX mean‑reversion framework outlined in my previous note. While the unwind of geopolitical risk has driven a broader USD pullback, CAD’s lower beta to USD in risk‑on phases, particularly when oil prices are falling rather than rising, continues to limit downside momentum in USD/CAD.
Positioning data reinforces that restraint. Net futures positioning remains slightly bearish at around ‑39k contracts, improved from late‑2025 extremes but still far from signaling enthusiasm for a sustained Loonie rally. Both leveraged funds and asset managers remain cautious, suggesting the latest move reflects macro relief rather than a decisive shift in CAD sentiment.
Domestic fundamentals remain the key constraint. Idiosyncratic Canadian risks, soft data prints and evidence of a stagnant growth backdrop, continue to weigh on CAD relative to peers that benefit more directly from improved global risk appetite. This divergence keeps USD/CAD supported on dips, even as broader mean‑reversion dynamics pressure the USD lower.
Looking ahead, near‑term direction will hinge on the Canadian labor market. Another soft labor report, particularly if March unemployment rises toward the expected 6.8%, would reinforce the Bank of Canada’s cautious stance and argue for USD/CAD downside remaining gradual rather than directional, despite the improved global risk backdrop.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: April 6 – 10
All times are in EST
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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.
