USD: Oil and US Dollar slide after Iran US peace signal
Positive news for risk-on sentiment coming from the Middle East after Iran confirmed it will sign a preliminary peace framework with the US on Friday in Switzerland. Crude oil fell roughly 5%, with the WTI sitting just at the psychological $80 a barrel on the prospect of shipping flows resuming through the Strait of Hormuz, while the US Dollar slightly weakened. Together, the moves signal a rapid compression of the war-related risk premium that has weighed on global growth and inflation expectations for the past 107 days.
Are markets running ahead of the diplomacy? The agreement initiates a narrow 60‑day bridge framework rather than a comprehensive settlement, leaving the ultimate trajectory still uncertain. Iranian officials are already positioning the talks as a domestic win, even as negotiations proceed under deep mutual mistrust. Under the interim terms, Tehran would freeze nuclear expansion and reopen key shipping lanes in exchange for roughly $25 billion in released assets. The harder work, verifying compliance and resolving technical disputes, still lies ahead, a fragility underscored by mounting hardline protests inside Iran.
For policymakers, the timing is awkward. The sudden shift in the geopolitical backdrop collides with Federal Reserve Chair Kevin Warsh’s first policy meeting this Wednesday, one he had prepared to navigate amid elevated energy-driven inflation risks. The sharp pullback in oil prices now complicates that framework, forcing officials to reassess near-term inflation dynamics just days before Wednesday’s rate decision.
Markets continue to expect the Fed to hold rates in the 3.50%–3.75% range, but lower energy prices ease pressure on the committee to lean hawkish. That backdrop gives Warsh scope to steer the divided panel toward a more explicitly neutral posture. In his inaugural press conference, he is likely to emphasize trimmed-mean and core inflation measures over volatile headline prints, reinforcing the message that policy will not chase short-term commodity swings.
As a result, this week’s meeting is less about rates than credibility. Investors will parse the “dot plot” for signs of internal fracture, particularly around the inflation outlook. Any visible discord, or an unsteady debut from the chair, could reverberate quickly through rates markets. For Warsh, projecting command, with the former Chairman sitting on the board, while anchoring expectations in a shifting macro environment will be the defining test of his early tenure.
EUR: EUR/USD lifts on Hormuz reopening deal
EUR/USD opened higher this morning after the United States and Iran reached an interim agreement to reopen the Strait of Hormuz. The pair had been recovering gradually from its sharp selloff two weeks ago, when it broke below the 1.16 level following a strong US jobs report. It has now regained fresh upside momentum, reclaiming that handle. EUR/USD has also moved above the 21-day moving average, a key short-term momentum gauge, which now sits near the 1.16 level. A close above this threshold would suggest euro buyers are gaining firm control.
The euro has been sensitive to shifts in sentiment around the drawn-out peace negotiations since the ceasefire announcement in early April, reflecting the region’s exposure to elevated energy prices given the bloc’s dependence on external supply. That said, uncertainty remains around the practical resumption of vessel traffic through Hormuz, as well as Israel’s stance on the agreement in the context of its parallel conflict with Hezbollah. Their ongoing hostilities have frequently disrupted diplomatic efforts, and concerns persist that they could still undermine the current accord.
We see limited scope for sustained gains in EUR/USD at this stage, as markets appear to have partly priced in the agreement following weeks of steady conciliatory rhetoric, despite sporadic bouts of violence. Participants may also prefer to wait for the formal signing in Switzerland on Friday to gain clearer insight into the details of the deal (if not to confirm that the agreement is effectively in place). If the de-escalation trend holds, resistance at 1.1650 and then 1.1670, the late-May high, will be key levels to watch. A break above could reinforce upward momentum.
Geopolitical developments around Friday’s signing and the Federal Reserve policy meeting are set to drive markets into the end of the week. Beyond that, we will keep an eye out on today’s April industrial production for the eurozone and tomorrow’s ZEW sentiment survey for Germany and the wider bloc.
CAD: Loonie still under pressure
After spending most of last week trapped in the 1.3900–1.3950 range, the USD/CAD broke higher and printed 1.4024, the highest level in 2026. It has reversed since and traded back around 1.398 after US and Iran have moved towards diplomacy. The pair is trading above the 20-day (1.384), 50-day (1.376), 100-day (1.372) and 200-day (1.381) moving averages, but the move looks stretched and susceptible for consolidation and retracement closer to 1.39 if the US Dollar subsides and short-term yield differential accompany the movement. On the downside, first support sits at 1.3950, followed by 1.3900.
As expectations of Fed tightening keep propping up the US Dollar, only a confirmed safe passage through the Strait and normalized crude shipments, driving oil below $80, could ease the dollar’s momentum. In the meantime, markets will remain highly attentive to this week’s Fed commentary.
What’s happening in markets this week?
This week shifts the market’s focus squarely to central banks. It begins early with the Bank of Japan and the Reserve Bank of Australia on Tuesday, setting the tone for global policy as investors gauge how Asia’s policymakers are handling slower growth alongside sticky inflation. Attention then turns mid‑week to Washington, where the Federal Reserve takes center stage on Wednesday. This meeting stands out not just because of the policy decision, but because it marks the first chaired by Kevin Warsh, with former Chair Jerome Powell unusually still seated at the table. With inflation running hotter and markets now pricing a possible year‑end hike rather than 2026 cuts, investors will be parsing Warsh’s press conference for any shift in tone, guidance, or even how the Fed chooses to communicate its outlook.
Thursday brings a second wave, with interest rate decisions from the Bank of England and the Swiss National Bank, followed by a busy slate of emerging‑market central banks including Brazil, Chile, Norway, Russia and Ukraine. Alongside policy, the data calendar stays heavy throughout the week. US and Chinese retail sales arrive mid‑week, while the UK releases CPI and PPI data that could shape expectations for the BoE. Europe adds industrial production and inflation prints, while markets also track US industrial output, jobless claims and regional Fed surveys, China’s housing data, and Japan’s trade and inflation figures. Taken together, the week offers a dense mix of policy signals and economic data, with central banks firmly back in the driver’s seat for global markets.
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Calendar: June 15-19
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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.
