- Deadline drift. Trump extends his strike deadline on Iranian power plants to 6 April, swinging between skepticism and optimism on a ceasefire, leaving investors nervous into the weekend.
- Deal or no deal. Iran rejected the US‑backed 15‑point proposal and counters with its own terms, keeping diplomacy stalled and risk sentiment fragile.
- Choke‑point power. The Strait’s ongoing shutdown has triggered fuel rationing in Asia and has amplified global growth and inflation risks.
- Gulf on edge. Saudi Arabia and the UAE edge closer to potential military involvement as Iranian strikes hit regional assets.
- Barrel of nerves. Brent heads for a record monthly surge, with traders openly flagging the risk of $200 oil and what it would mean for the global economy.
- PMIs flash red. The latest business surveys show activity already cooling as supply disruptions, shipping delays and energy uncertainty spill into global demand.
- Tech takes a tumble. The Nasdaq has slipped into correction for the first time this year whilst the S&P 500 has dropped over 7% from its peak.
- Dollar holds firm. The USD erased earlier‑week losses and could gain another leg higher if the conflict escalates, supported by safe‑haven flows but mainly because of the US position as a net energy exporter.
Global Macro
Global sentiment sours on 1-month long conflict
US PMIs. Sentiment indicators have begun to reflect conflict‑related drag. S&P PMIs showed US business activity slowing in March to an almost one‑year low: Composite PMI slipped to 51.4 from 51.9, and Services to 51.1 from 51.7. Manufacturing remained more resilient, rising to 52.4 from 51.6.
EZ PMIs. In a similar vein to the US, eurozone PMIs showed weakening services activity and rising prices. Manufacturing proved more resilient, as expected: built up inventories and pre planned production cycles need to unwind before any deterioration becomes visible. The sentiment hit is also more likely to show up in services, as discretionary categories (travel, hospitality, leisure), which outweigh discretionary manufacturing, are the first to be cut by households when conflict driven uncertainty rises. The low‑growth, high‑price backdrop mirrors other economies’ recent PMI releases, pointing to a more synchronised stagflationary shift amid the ongoing conflict.
CPIs. The UK reported headline inflation holding steady at 3.0%, but Core CPI unexpectedly ticked up to 3.2%. Similarly, Australia’s CPI eased slightly to 3.7%, staying stubbornly above the RBA’s 2–3% target. The subsidy effect showed up in Japan’s inflation prints. Japan’s National CPI rose 1.3% YoY for February, coming in below the consensus of 1.5% and marking the slowest pace of growth since March 2022. Even more significantly, Core CPI (excluding fresh food) slowed to 1.6%, dropping below the Bank of Japan’s (BoJ) 2.0% target for the first time in nearly four years. This data won’t turn the BoJ dovish.
US labor. Weekly Initial Jobless Claims came in exactly as expected at 210,000, while Continuing Claims dropped to 1.819 million, their lowest level since mid-2024.
Week ahead
Data to take a conflict tint
- Inflation shock incoming? Inflation for the eurozone is due next week. Consensus points to a 0.8% jump, taking the headline rate from 1.9% to 2.7% as conflict‑driven energy shocks begin crippling inflation pressures across the bloc. The ECB has hinted that an April hike is possible but has since remained non‑committal. An inflation trajectory rising this sharply may well validate that hawkish inclination.
- Labour stabilisationstory gets muddier. The US jobs report is due next week. The Fed highlighted a more stable labour market in recent meetings, yet severe weather across the states, now coupled with the ongoing conflict, has muddied that stabilisation narrative. February was weak, with the US shedding 92k jobs, though not entirely surprising given adverse weather and the large +100k gain the month before. It may still be too early for conflict‑related anxiety to show up in the March release, but the report remains key in the context of the Fed’s dual mandate and its hiking considerations amid conflict‑driven inflation pressures.
- ISM PMIs in focus as stagflation risks build. ISM PMIs for the US will also be monitored. After the S&P Global surveys showed services activity dipping while the prices‑paid component moved higher this week, we expect a similar stagflationary tilt in the ISM release as the conflict upends energy markets and fuels chronic uncertainty that is weighing on activity.
FX views
Parsing the de-escalation signal
USD Dollar holds firm on conflict noise. The dollar nears the week’s end firmer, up about 0.4%, as the conflict in the Middle East keeps a safe‑haven bid under the greenback. Meaningful gains remain capped by hopes of de‑escalation, though Washington’s upbeat tone on diplomacy contrasts with Tehran’s dismissals. Both sides have outlined conditions for ending the war, but the overlap is thin. With mixed signals out of DC and Israel pressing ahead with strikes, investors may be leaning toward a more prolonged conflict scenario. Brent crude now hovers around $108 a barrel, while market rate expectations remain unanimously hawkish despite some paring back earlier in the week. The US dollar index (DXY)’s bullish trend remains firmly intact, with the index trading comfortably above the 21-day moving average near 99.300. Should the touted diplomatic efforts falter, a firm posture above the 100 level would be the base case.
EUR Euro softness remains sentiment-led. EUR/USD has fallen for four straight sessions, but the move looks far more sentiment‑driven than structural. Higher oil prices do weigh on the eurozone’s terms of trade, but the FX transmission is indirect and not strong enough to justify the scale of the drop. What’s really pushing the pair lower is the deterioration in growth sentiment as the bloc’s dependence on imported energy comes back into focus. Meanwhile, long‑term inflation expectations remain anchored, and the ECB’s March projections still show inflation returning to target by late 2027. With oil’s weekly upside contained and a hawkish tone slowly building at the ECB, there’s little evidence of a deeper, fundamentals‑based repricing. That leaves the euro vulnerable to swings in geopolitical mood rather than a structural reset – and it also means the downtrend could unwind quickly if de‑escalation signals re‑emerge. For now, we expect consolidation in the 1.14–1.15 range as diplomatic efforts remain broken, keeping the pair below the 21‑day moving average at 1.1582. A break below 1.1411 becomes our base case if recent diplomatic overtures are formally abandoned.
GBP Yielding ground. We’ve cautioned that sterling’s yield‑driven support isn’t a one‑way street, and this week offered a gentle reminder. UK gilt yields continued to climb as markets priced in the inflationary spillovers from the Iran conflict and the prospect of further BoE tightening. That repricing has kept GBP near the top of the G10 pack, but there are limits to relying solely on yield appeal when the inflation impulse is supply‑led. In those conditions, higher yields can still support the pound, yet they also amplify growth concerns, naturally tempering the upside. GBP/USD is hovering just above 1.33, with upside still capped by the 200‑day moving average at 1.3434 — a level the pair hasn’t managed to break since the conflict began. With energy prices elevated and UK growth risks creeping higher, the short‑term bias for the pair remains skewed lower. Sterling has fared better against the euro. Even after slipping back from 1.16, GBP/EUR is still on track for its strongest monthly gain in more than a year, up over 1.2%. The pair remains comfortably above key moving averages, with the 21‑day offering steady support through March.
CHF Jawboned, not broken. The Swiss franc’s recent softness says less about fading haven demand and more about markets taking the SNB’s intervention threat seriously. EUR/CHF pushed up to 0.9182 — its highest level since early February — leaving the cross up more than 1% this month despite the Iran conflict showing no sign of resolution. The real turning point was the SNB’s 19 March meeting, where policymakers reiterated their readiness to sell francs to counter excessive appreciation, while stopping short of returning rates below zero. President Schlegel reinforced that stance this week, keeping pressure on CHF across spot and options markets. That signalling has been enough to temper haven flows at the margin. But it hasn’t broken the underlying trend. Technically, the franc still sits within a medium‑term bullish channel against the euro, and history is clear: in every major crisis since 2000, when geopolitical stress escalates materially, haven demand overwhelms policy jawboning. If the Iran conflict deepens, the SNB’s willingness to lean against appreciation will matter far less than the market’s instinct to seek safety — and the franc will behave accordingly.
CAD Two-month low. The Loonie’s descent to a two-month low suggests that internal economic deceleration is now weighing more heavily on the currency than the support typically provided by favorable terms of trade in energy. Following a cautious tone from the Bank of Canada last week, investors have turned the focus back to a sluggish labor market and economic macro figures that has missed projections. This fundamental weakness is being compounded by bearish sentiment in the futures market, where leveraged funds have flipped to a net-short position on the Loonie, signaling skepticism about a smooth economic transition as financial conditions tighten. The USD/CAD is trading above its 200-day SMA for the first time since mid January. Consolidation around 1.38 is likely, absent a spike in haven-demand. As the end of the five-day negotiating window approaches, markets are positioning for volatile headlines into the weekend. 1.37 remains key long-term support, 1.39 key long-term resistance.
AUD Aussie backs off as RBA stays non‑committal. RBA Assistant Governor Christopher Kent kept Australia’s rate outlook flexible, pushing back against the idea of a clear next move. While attention latched onto his remark that a “higher neutral rate may need tougher policy,” his broader message was more balanced. Kent focused on how financial conditions and views on the neutral rate are shifting, not hardening. He flagged two-way risks. Tighter conditions driven by global tensions could pull the short-term neutral rate lower, while stubborn inflation and rising expectations could push it higher. He stopped short of signalling action either way. Price moves suggest caution is winning for now. AUD/USD has dropped about 4% from its March 11 high of 0.7187 and slipped roughly 1.5% against the USD over the week of March 23. The next support level to watch sits near 0.6866, close to the pair’s average over the past 100 days. Momentum still allows room for further downside in the near term. Traders will watch RBA meeting minutes, building approvals, and the trade balance for clearer direction.
CNH Trump visit puts China back in focus. President Trump will travel to China on May 14–15 for talks with President Xi Jinping in Beijing. It will be the first visit by a US president in almost ten years. The trip follows a delay linked to fighting in the Middle East, but the White House stressed the visit will go ahead regardless of events there. The meeting aims to reset dialogue and steady ties between the US and China, putting the spotlight back on trade, investment, and wider cooperation. USD/CNH has moved more than 1% above its late‑February low of 6.8267 set on February 26. The next area of resistance to watch is near 6.9665, around the pair’s 100‑day average. With the move gathering pace, the push higher may continue in the short term. Focus now shifts to upcoming manufacturing PMIs and RatingDog PMI releases.
JPY BoJ edges toward slow, steady tightening. Minutes from the Bank of Japan’s January meeting show policymakers leaning toward gradual rate increases. They still see overall conditions as easy, helped by a weak yen, while inflation continues its slow climb toward the 2% target. Officials avoided any fixed timetable but signalled they could raise rates every few months if the data holds up. Since then, higher oil prices have added pressure to the inflation outlook, strengthening the case for further steps. USD/JPY is hovering near the 160.00 level at the time of writing. Initial support sits at the 21‑day EMA near 158.38, followed by the 50‑day EMA around 157.25. Key releases ahead include Tokyo core CPI, industrial production, the Tankan surveys for manufacturers and services, and the S&P Global services PMI.
MXN Dovish cut. All indicators suggest Banxico will reach its 6.5% neutral rate sooner than expected. In a move that surprised a significant portion of the market, Banco de México (Banxico) decided to resume its easing cycle today, by cutting the benchmark interest rate by 25 basis points to 6.75%. Coming off a “hawkish pause” in February, this decision highlights the board’s growing concern over cooling economic growth, even as inflation remains stubborn. By cutting now, Banxico signaled that the weakness in economic activity has become a more pressing concern than short-term price volatility. The statement included a dovish hint, suggesting the board will evaluate the timing for at least one more reduction later this year, though they notably refrained from committing to a specific meeting (like May) to maintain “data-dependent” flexibility. The Mexican Peso (MXN) saw some immediate volatility following the announcement, given the narrowing interest rate differential with the US Federal Reserve. The Peso has faced pressure from rising oil prices and a heightened sensitivity to risk aversion. After jumping from its 2026 low of 17.1 to 18.2, the currency looks to settle closer to the 18.00 handle, erasing year-to-date gains.
BRL Stable amidst global headwinds A major reason for Real’s resilience is the country’s status as a net energy exporter, which provides a helpful financial buffer while global oil prices remain elevated. At the same time, domestic inflation has climbed faster than anticipated. This stubborn price pressure is making the Central Bank nervous about their long-term targets. However, policymakers still plan to move forward with gradual cuts to their benchmark borrowing costs. Looking ahead, the Real is well-positioned to outshine EM and LatAm peers, especially if geopolitical tensions cool down. A peaceful resolution to overseas conflicts would naturally reduce market anxiety and broadly benefit emerging economies. Nevertheless, a significant shift in momentum is expected later in the summer as public attention pivots toward the upcoming national elections. LatAm currencies tend to underperform in a contested and uncertain political landscape as elections gets close.
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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.
