- Ceasefire, market fireworks. A conditional two‑week US–Iran ceasefire brokered by Pakistan triggered sharp moves across financial markets, though it’s too soon to tell whether the fragile truce can hold.
- Oil collapses, then snaps back. WTI plunged as much as 20% on Wednesday, unwinding a chunk of its war premium before rebounding about 6% as Israeli strikes in Lebanon and stalled Hormuz progress quickly tested sentiment.
- Relief rally, but conviction thin. The ceasefire sparked one of the broadest global risk‑on moves of the year, including the biggest one‑day EM equity surge since March 2020 and a 6% weekly gain in MSCI Asia Pacific, its strongest since November 2022.
- Rates whipsaw. The oil collapse sharply tempered rate‑hike expectations and boosted Fed‑cut pricing, but sticky inflation and a higher term premium kept bond markets cautious and directionally uncertain.
- The FX flip. The USD dropped over 1% and high beta currencies gained with Antipodeans and Scandies leading the G10. FX options still flag asymmetric risks though — with sterling carrying the most durable tail premium as the inflation and energy aftershock remains uneven across majors.
- Durability is the macro hinge. Markets remain hypersensitive to any deterioration in talks. The outlook ultimately depends on tanker flows through Hormuz, the medium‑term energy path and how central banks respond to shifting inflation and growth expectations.
Global Macro
De-escalation hopes pulls macro risks from the brink
US-Iran. A two-week US–Iran ceasefire and the reopening of the Strait of Hormuz briefly erased the market’s “war premium,” cooling oil prices and easing stagflation fears. However, with shipping transit still fragile, the macro risk premium is unlikely to fully dissipate until operations normalize.
US PCE. The Fed’s preferred inflation gauge printed firm: Core PCE +0.4% m/m and +3.0% y/y, while headline PCE inflation was +2.8% y/y. Under the hood, personal income slipped -0.1% m/m as PCE spending rose +0.5% m/m, a “still-spending / still-sticky” setup heading into the shock period.
Fed Minutes. The minutes underscored how the conflict’s energy shock is filtering into the Fed reaction function: staff noted front‑month crude futures were ~50% higher over the intermeeting period, with near‑term inflation pricing lifting while longer‑horizon measures moved less; futures implied no cut fully priced until December, and options-implied odds of hikes into early‑2027 rose to ~30%.
US ISM Services. Services activity cooled but price pressures stayed hot. The ISM Services index eased to 54.0 in March (from 56.1), while Prices Paid jumped to 70.7 (from 63.0) and New Orders rose to 60.6 (from 58.6)—a mix consistent with softer growth but sticky inflation signals.
US CPI. The overall consumer price index surged by a widely anticipated 0.9% for the month, marking the largest upward leap since 2022. Core inflation rose by a modest 0.2% monthly and 2.6% annually. This underlying stability is currently overshadowed by a massive spike in energy costs stemming from recent geopolitical conflicts. The overarching energy index experienced an aggressive 11% monthly jump, which represents its largest increase since 2005.
Week ahead
Inflation flaring at both ends
- PPI jumps. US PPI is due next week and is expected to jump 1.2% m/m in March, up from a 0.7% rise in February. The conflict has put significant pressure on oil prices, with the pass‑through feeding cleanly through supply chains.
- A recovery that isn’t. Eurozone industrial production for February is released next week. While pre‑conflict, the indicator remains useful for gauging momentum as we move through 2026. After this week’s disappointing German figures, expectations point to a modest 0.3% m/m increase – largely a base effect following January’s sizable 1.5% drop. The broader picture is one of a bloc struggling to gain momentum even in a no‑conflict scenario, with the conflict now further aggravating the outlook through higher energy costs and weaker external demand.
- Beige book to map Fed’s two-sided risks. We will also look at the Fed’s Beige Book, an anecdotal snapshot of the state of the US economy. It may offer useful qualitative evidence of the growing two‑pronged risk profile the Fed faces – softer growth and a cooling labour market on one side, and inflation pressures on the other, as the conflict begins to bite.
- Any revision matters. The final release of the eurozone’s March CPI is also due. The preliminary print showed 2.50% y/y and 1.20% m/m. With the ECB focused heavily on price pressures given its single inflation-centred mandate, any upward revision – while unlikely to bring forward rate hikes materially – would help crystallise the more hawkish stance the ECB has adopted since the conflict began.
All times are in GMT
FX views
De-escalation momentum builds
USD Ceasefire softens the dollar’s edge. The US dollar gave back part of its war‑driven gains this week, with the DXY slipping around 1% as tentative optimism followed the US-Iran two‑week ceasefire mediated via Pakistan. Oil fell back below $100 and risk sentiment improved, lifting risk assets. Even so, the dollar is still holding just above key support near 99, signalling that bearish momentum hasn’t fully taken hold. Markets are waiting for safe passage through Hormuz – a central condition of the ceasefire – and clearer progress at the negotiating table. Until then, the greenback is likely to hover around the 99 line. The war remains the dollar’s only real lifeline. As sentiment improves, fundamentals come back into focus, and the Fed’s two‑sided risk profile offers nothing like the hawkish clarity the ECB is projecting. That leaves the dollar fundamentally unsupported and tilting toward a more bearish balance of risks as de‑escalation builds. Weekend negotiations should steer price action into next week; if talks progress, we see scope for a move toward 98.500, followed by 97.500.
EUR Range intact, bias tilts higher. EUR/USD is up just over 1% on both the week and the month so far, with better risk sentiment doing most of the work. Since the conflict began, the pair has traded mainly as a reflection of risk‑on/risk‑off swings, while oil’s inability to break decisively above $100 showed markets were unwilling to price a deeper supply shock. With no renewed hit to Europe’s terms of trade, sentiment took over as the dominant driver. So once the de‑escalation trade kicked in during late March, the pair simply lacked the bearish catalysts needed to justify a move below 1.14. Technically, the range remains unchanged. Since Liberation Day on 2 April, EUR/USD has been drifting between 1.15 and 1.18, and it’s now sitting near 1.17 as markets wait for clearer de‑escalation signals. If sentiment improves on more concrete progress, the euro should draw additional support from a relatively more hawkish ECB compared with the Fed. That backdrop would help the pair hold the 1.17 area more comfortably, with 1.18 emerging as the next clear upside target.
GBP Springs back. Thanks to the ceasefire, the plunge in energy prices and rebound in risk appetite has seen GBP/USD spring to a one‑month high above 1.34. It’s now trading comfortably above all major daily moving averages — a clear signal that bullish momentum has re‑established itself. Despite the sharp dovish recalibration in BoE expectations the collapse in energy prices has been the dominant channel supporting sterling and weighing on the dollar. Positioning adds another constructive layer leaving ample room for more GBP short‑covering if sentiment stays risk‑positive. Against the euro, however, the picture is more fragile. GBP/EUR has snapped a three‑week losing streak, but the pound is still struggling to reclaim 1.15 after being firmly rejected at 1.16 last month. That 1.16 level is structurally significant — effectively the post‑Brexit average. GBP/EUR remains trapped between 1.16 and 1.1430, a range intact since last July. A decisive break below 1.14 would expose 1.12, a development that could unfold given rate differentials now favour the euro and the UK’s local elections in May pose political headwinds for the pound.
CHF A clean slate. A few weeks ago, CHF weakness was exacerbated by SNB intervention signals tempering haven demand, although as a net energy importer, the Middle East crisis has seen CHF softness more about terms‑of‑trade pressure than haven dynamics. Still, our view then was that if the Iran conflict escalated materially, haven demand would eventually overwhelm policy jawboning or terms of trade. This week marks a clear shift though. The tentative US–Iran ceasefire removed the very escalation risk that might have reignited haven demand, yet USD/CHF still fell about 1.5%, erasing YTD gains. This is because the geopolitical and energy‑security premium unwound. Elsewhere, the franc has been broadly flat against EUR and GBP, reinforcing that recent price action was concentrated in USD‑centric flows. Looking ahead, the fragile ceasefire leaves the outlook finely balanced. If it holds, CHF likely gains further against the dollar but could soften elsewhere. If tensions flare again, the franc may weaken initially on energy‑exposure grounds, but at what point does its haven appeal become too powerful for markets to ignore?
CAD Lags risk relief. 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. The USD/CAD has traded as low as 1.381, after breaking out of a tight consolidation range that had held 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. As more de-escalation signals add ending the week, after three consecutive weeks going up, the USD/CAD is looking poised to establish now closer to 1.38. Jobs report for the month of March came in line with expectations, leaving the CAD to follow risk sentiment and war headlines coming from the US ahead of next week.
AUD Stalls near the top after sharp run. AUD/USD climbed more than 2% in the week of April 6 as risk appetite improved, making AUD/USD one of the strongest G10 movers. That rally now looks stretched, with the pair sitting near the top of its six‑month range. AUD/USD is struggling to extend gains and traders are watching whether it can hold above 0.7000. The next key support lies at 21-day EMA of 0.6991, followed by 50-day EMA of 0.6971. Domestic data adds uncertainty. Weak services activity and softer confidence keep pressure on the currency, even as jobs growth holds up. Near term, AUD/USD direction hinges on upcoming upcoming NAB business confidence, employment change, and unemployment rate data, which will test whether buyers stay engaged or step aside.
CNH Calmer geopolitics pushes CNH toward 3-year high. USD/CNH slid to a three‑year low as easing geopolitical tension reduced demand for the dollar. Officials pointed to behind‑the‑scenes diplomacy involving China, which helped steady sentiment and boosted confidence in the offshore yuan. Over the week of April 6, CNH gained more than 0.6%, keeping USD/CNH under pressure. The pair now trades near the recent low near 6.8200. Sellers remain in control unless USD/CNH can reclaim higher ground. The next key resistance lies at 21-day EMA of 6.8756, followed by 50-day EMA of 6.9009. On the downside, a break below 6.8155 exposes 6.8000, a level many Dollar buyers are watching closely. Upcoming Chinese data will shape the next move. Keep an eye on upcoming data: new loans, exports, imports, trade balance, GDP, fixed asset investment, industrial production, and unemployment rate.
JPY Yen steadies as policy talk signals rate hike. USD/JPY remains above 159.00 at the time of writing. A former central bank official signalled another rate hike may come soon, keeping support under the yen. JPY still logged small gains vs the dollar in the week of April 6, though it lagged most G10 peers. USD/JPY is currently about 1% below its March peak near 160.46. The pair needs to clear 160.00 to restart upward momentum. If it slips further, buyers will look first to the next key support at 50-day EMA of 157.9175, followed by 100-day EMA of 156.4920. Attention turns to Japanese industrial production and machinery data. Solid numbers could strengthen the yen and keep USD/JPY capped, while softer outcomes risk another test of the 160 handle.
MXN Big gains on relief rally. USD/MXN downside momentum has re‑emerged following the confirmation of the Iran ceasefire, with the Mexican peso gaining around 3% against the USD over the past four sessions and the pair now trading near 17.30, its lowest level since late February. This marks a clear reversal from the sharp risk‑off rally that carried USD/MXN from near 17.00 in February to a peak around 18.20 in early March. The pair had been consolidating around 17.80 ahead of the ceasefire, but broader risk relief and a softer USD have allowed MXN to outperform within EM FX. Domestically, the Bank of Mexico recently delivered a surprise rate cut to 6.75% to combat economic stagnation despite rising headline inflation. The minutes revealed this week a board that remains divided on the path forward, especially as they target inflation convergence by 2027. Ultimately, the market is looking for a durable off-ramp rather than a temporary pause. A sustained trend will depend on whether geopolitical truces hold and if global shipping and energy systems can finally normalize. While the peso currently benefits from its carry appeal, underlying sentiment remains fragile.
BRL Hitting lowest since May 2024. The USD/BRL pair is trading well below its 50, 100, and 200-day simple moving averages. This momentum recently pushed the Real down toward the 5.06 level, officially touching its lowest since May 2024. This clear technical breakdown perfectly mirrors a broader shift in global risk appetite, which was heavily supported by the recent two-week ceasefire agreement between the United States and Iran that favored emerging market assets. The Real is actively outperforming its global peers thanks to a few powerful fundamental drivers: an attractive carry-yield, plus a massive 70% jump in oil exports which have significantly boosted Brazil’s trade balance, while the domestic electoral backdrop strongly hints at a market-friendly shift toward tighter fiscal discipline. Interestingly, even though as last month Brazil saw massive $6.33 billion net capital outflow, as global tensions continue to ease, actual investment flows will likely reverse to match the current’s bullish momentum.
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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.
