The U.S. Dollar is back to gaining across the FX board as markets sentiment turned sour as concerns grow over the length of the conflict in the Middle East.
U.S. President Donald Trump spoke last night and left traders feeling a swift end to strikes over Iran, along with the negative effects that accompany them, will not be coming soon.
Investors as well were looking for concrete plans regarding the re-opening of Strait of Hormuz, but this was not addressed to the satisfaction of risk takers who yesterday felt quite optimistic a deal was in the works towards a ceasefire that would allow flow of shipping. Bonds as well as stocks simply tumbled with increased expectations that high oil prices will stick and get worse. Naturally, this quickly brought resurgence to the Buck as the “petro-dollar” strengthening remains a feature.
Liquidity and overall activity are getting lighter as participants get ready for Easter holiday observances in different regions. Europe remains active for what is left of their Thursday but will step away Good Friday and Monday. Our neighbor to the south is closed today and tomorrow, but normal business around Mexico returns after Sunday. A long weekend ahead may produce another flip from worry to positivity. For now, Dollar is king ahead of Non-Farm Payroll and Employment Situation figures due tomorrow.
What to Watch This Week…
- US Nonfarm Payrolls, Friday 8:30AM
- Monex USA Online is always open
EUR ⇓
The Euro fell by 1.6% throughout the month of March and its resurgence to begin April was cut short rapidly as markets seem to believe war will continue to impact economic growth. We will get a clearer picture about the current situation in the Euro-zone next week when releases of Purchasing Managers Indices and Retail Sales come out highlighting comfort, or discomfort, for businesses to spend and consumption. Meanwhile, we will also get Producers Price Index numbers from February and the Sentix Investor Confidence survey. Inflation, of course, a main worry for the Ancient Continent, but the data may come from prior to the Iranian conflict. Recent months had shown some deflation for suppliers.
GBP ⇓
The Pound is down by over half a percent this morning as is most tender as the Buck’s rise comes at a time when trading action fades for Easter. While Iran and everything about limited energy down the line leads most headlines, overnight on the other side of the pond there was a U.K. government bond selloff after yields increased as did bets that the Bank of England will need to act “hawkish” and raise interest rates. This happened even after BOE Governor Andrew Bailey warned in comments that traders were overdoing the speculation over central bank action. BOE officials will meet on April 30th and on June 18th. Odds of a hike by June are 68.0% and there are growing chances that two 25-basis-point interest rate hikes could come by end of 2026.
