War developments pulled in both directions, leaving investors on edge On the one hand, Iran struck an oil tanker, carrying Kuwait oil, in port in Dubai. On the other hand, reports suggest President Trump told aides he is willing to wind down hostilities and pressure Iran diplomatically to re-open the Strait of Hormuz. May WTI has held about $100 today and approached $107 a barrel. June Brent reached almost $110 and is now almost flat on the day around $107.50.
The dollar is narrowly mixed with a slightly firmer profile. The jump in the eurozone’s CPI this month was no surprise. There are large options struck at $1.15 that expire today and tomorrow that may help block much of a euro recovery. Tokyo reported softer March CPI but also weaker February industrial production and retail sales. Still, the greenback has held below JPY160. Several Fed officials speak today, including Presidents Goolsbee and Schmid on the economy, while Governor Barr speaks late in the session on regulation of stable coins. With today’s February JOLTS report, the economic focus in the US shifts to the labor market, with the ADP private sector estimate out tomorrow and the March nonfarm payroll report on Friday. The median forecast in Bloomberg’s survey is for a 65k increase from a preliminary estimate of a loss of 92k jobs in February.
Prices
G10
• The five-session slide took the euro from above $1.16 to slightly below $1.1445, which matches the low from March 19. It recovered to almost $1.1500 on news that President Trump again teased about end the war, and without re-opening the Strait of Hormuz. However, the upticks were not sustained, and the euro is hovering around little changed levels. Note that there are 2.5 bln euros options at $1.15 that expire today and another 4 bln euros options that expire there tomorrow. The low set on March 13 (~$1.1410) was the lowest since last August.
• The yen was squeezed higher as some of the late shorts covered yesterday as Japanese officials expressed more concern about the yen’s weakness. Also, the record from the recent BOJ meeting held out the possibility of more than a quarter-point hike. The swaps market is skeptical. It has about 70% chance of a hike late this month and 53 bp of tightening discounted this year. We are skeptical of material intervention. The verbal measures seem to do the trick. The dollar approached but held below JPY160 today. The US dollar set the session low in North America yesterday slightly below JPY159.35. It has held mostly above JPY159.50 so far today. Nearby support is seen in the JPY158.75-JPY159.00 area.
• Sterling took another step lower yesterday. It recorded a low near $1.3175, which it had not been seen since last November. It settled below the lower Bollinger Band (found slightly below $1.3195 today). The losses were extended to $1.3160 today before sterling recovered to around $1.3225. The $1.3240-50 area offers the first hurdle. Options for nearly GBP650 mln at $1.3250 expire today.
• The Canadian dollar fell for the sixth consecutive session yesterday, reaching its lowest level since last December. Still, the 0.2% loss still made the Loonie one of the best performing G10 currencies: only outshone by the Japanese yen (intervention threat) and the Norwegian krone (more sensitive to oil prices). The US dollar reached CAD1.3945 before spending most of the remainder of the North American session in a narrow range (~CAD1.3915-30). The greenback is trading firmly near yesterday’s highs. The next target is the CAD1.4000-20.
• The Australian dollar extended its loss for the seventh consecutive session yesterday. It slipped below $0.6835 to record a two-month low. It consolidated in the North American afternoon, mostly between $0.6850-60. It is confined to about $0.6835-75 today. Options for A$1.6 bln struck at $0.6825 expire today.
EM
• The broad dollar gains lifted it to a new high for the year against the Mexican peso yesterday (~MXN18.1630). The high was scored in the Asia Pacific session. It did not trade above MXN18.15 in North America. The dollar set a marginal new high near MXN18.1645 today but has steadied. A close below the MXN18.00-05 area would help begin repairing the peso’s technical tone.
• The dollar consolidated after reaching a three-day high against the offshore yuan yesterday near CNH6.9270. It pulled back and settled lower for the second consecutive session. The dollar is trading with a slightly heavier bias and fell to about CNH6.9060 today. It is trading little changed on the session, late in the European morning. Continued consolidation looks like the most likely near-term scenario. After setting the dollar’s fix higher for the third consecutive session yesterday, the longest such streak of the year, the PBOC set it lower today (CNY6.9194 vs CNY6.9223).
• The short squeeze of the rupee triggered by a former of capital control (limits on the size of short rupee positions by banks) was soft lived yesterday. Previously, banks were permitted positions up to 25% of their capital. Now, only $100 mln. Local markets were closed for a local holiday and will re-open on April 2.
Other Markets
• Equities fell in the Asia Pacific region and the MSCI regional index fell for the fourth consecutive session. Nearly all the markets fell, but Hong Kong and Australia among the large bourses eked out small gains. Europe’s Stoxx 600 is around 0.70% firmer, as it posts gains for the second consecutive session. US index futures are ~0.75%-0.90% higher.
• Benchmark 10-year yields are lower. The 10-year JGB yield eased a couple of basis points, while the longer maturities fell 7-10 bp. Australian and New Zealand 10-year rates were 6-9 bp lower. European benchmark rates are up to about two basis points lower, as is the 10-year US Treasury yield, which puts it a little below 4.33%.
• Gold edged up to a seven-session high near $4620 but has pulled back and is hovering near $4550 in Europe. Silver reached a four-session high slightly below $73.50 and is continuing to trade near session highs.
• May WTI settled above $100 yesterday and has held above it today. It reached almost $107 before steadying. It is trading firmly around $104 in late European morning turnover.
Data
• Today’s US data are not the stuff that will distract from the war or this coming Friday’s March employment report. On tap are January house prices, the March Conference Board’s consumer confidence, for which the University of Michigan’s survey has stolen the thunder. The Chicago PMI and Dallas Fed’s services activity surveys do not draw much attention, even in the best of times. The February JOLTS report poses headline risk, but the war is bigger. Job opening jumped 6% in January, the largest monthly increase since October 2024. Tomorrow sees the March ADP estimate, auto sales, manufacturing ISM, and the final manufacturing PMI.
• StatsCan is expected to report a flat January GDP for Canada. The monthly GDP prints showed a small decline in Q4 25, and the quarterly estimate showed a 0.6% annualized contraction. It was the second quarterly contraction in 2025. The Bank of Canada projects 1.1% growth this year after 1.7% last year.
• Higher energy prices lifted the eurozone’s 1.2% in March to 2.5% year-over-year from 1.9% in February. The core rate slipped to 2.3% from 2.4%. The swaps market has a little more than a 50% chance of an ECB rate hike at the end of April, down from about an 85% chance last Tuesday.
• The UK took another look at Q4 25 GDP and confirmed it edged up by 0.1% quarter-over-quarter. The median forecast in Bloomberg’s survey is for the economy to expand by 0.3% in Q1 26 and for the next several quarters.
• Minutes from this month’s meeting when the Reserve Bank of Australia hiked its policy rate for the second consecutive meeting. It recognized the high degree of uncertainty generated by the new Middle East war. The futures market is discounting around 67% chance of a hike at next month’s meeting. At its peak on March 13, the pricing in the futures market was consistent with a 25 bp increase and almost a 40% chance of a 50 bp move. Separately, private credit increased by about 0.6% in February. It averaged slightly more than 0.6% a month for the past three quarters.
• Japan had a busy session. Tokyo’s March CPI slipped to 1.4%, a two-year low (February revised from 1.6% from 1.5%) and the core was eased to 1.7% from 1.8%. Last week, the BOJ introduced a new CPI measure that strips out “institutional factors” like education and energy-related subsidies. Going forward, it will be published a couple of days after the national CPI is reported (April 24). Separately, the labor market unexpectedly tightened in February, with unemployment softening to 2.6% from 2.7%. Lastly, after strong gains in January, retail sales and industrial production pulled back in February, -2.0% and -2.1%, respectively.
• China’s March PMI edged up. The manufacturing PMI moved to 50.4 from 49.0. It is only the second time since last March that it was above the 50 boom/bust level. The non-manufacturing PMI rose to a three-month high of 50.1 The composite rose to 50.5 from 49.5 in February. It finished last year at 50.7.
Reviewed by Marc Chandler
on
March 31, 2026
Rating:
