The U.S. Dollar is up against its G10 peers this morning after a report from Iran’s Fars News that a U.S. warship had been struck by Iranian missiles triggered a surge in oil prices and a drop in equity futures.
U.S. officials have denied that a ship was hit, which has equities bouncing off their lows and oil trimming some gains, but Brent remains over $111 and WTI around $104. This escalation immediately followed the announcement of a new Iranian ‘control zone’ in the Strait of Hormuz in response to President Donald Trump stating that the U.S. would begin guiding neutral ships through the embattled waterway starting Monday. This guidance reportedly does not involve U.S. Navy escorts. Renewed tensions are driving haven demand for the Buck.
What to Watch This Week…
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EUR ⇓
The Euro is down against the Buck this morning as risk sentiment sours. European Central Bank member Yannis Stournaras stated that concerns about a Euro-area recession are ‘real and justified’ and that there is no sign of significant pass-through of energy prices to inflation, but that it is too early to make precise estimates. The ECB is expected to hike interest rates at their next policy meeting in June, with a 90.3% probability of a 25-bps hike currently being priced in by Traders.
JPY ⇓
The Japanese Yen is down against the Greenback this morning following a statement from Japanese Finance Minister Katayama that the government’s stance is clear on speculative trading in currency markets, and that authorities remain ready to intervene in the market to prop up the yen. She provided no comment on whether authorities intervened in the market again after a reported buying spree last week. Traders remain vigilant for signs of further action from Japanese authorities.
