Risk appetites have been excited by the two-week cease fire in the Middle East. Stocks and bonds have rallied strongly. The precious metals are higher. May WTI is off more than 15%. June Brent is about 13% lower. The US dollar is weaker against all the G10 and emerging market currencies that are trading. The ceasefire is overwhelming other developments including the central banks in New Zealand and India standing pat.
Global investors have responded to the news, and that may leave North American participants in an awkward position. They will be greeted with large moves and may be reluctant to substantially extend the moves without seeing further developments.
Prices
G10
• Hope of a last-minute deal helped lift the euro to $1.1605 in North America yesterday, a three-day high. When the two-week ceasefire was announced, the euro soared a little through $1.1690 in thin trading and then made a new high in late Asia Pacific turnover near $1.1710. It pushed above the 200-day moving average (~$1.1675) for the first time since March 2. It also met the (38.2%) retracement of the losses since the high was reached in late January (~$1.2080 near $1.1665. The next retracement is near $1.1745.
• The dollar edged higher against the Japanese yen yesterday and traded briefly and barely above JPY160 for the first time in six sessions. Options for $1.1 bln expire there today. When the ceasefire was announced, the dollar was sold to JPY158.55 and then made a secondary low below last week’s low (~JPY58.30) to approach JPY158, where options for $600 mln expire today. A convincing break could see JPY157.35.
• Sterling rose to a three-day high to poke above $1.3300. The ceasefire announcement saw it surge to almost $1.3410. The gains were extended to $1.3445 to rise above the 200-day moving average (~$1.3415). The $1.3430 area represents the (38.2%) retracement target of the slide since the multiyear high was recovered in late January (~$1.3870). The next retracement is near $1.3515.
• The US dollar was sold to three-day lows against the Canadian dollar late in North America yesterday. It reached CAD1.3885. Then it was sold to around CAD1.3835 in immediate reaction to the ceasefire. It ultimately bottomed near CAD1.3825 and recovered to CAD1.3870 in Europe. The CAD1.3800 area is more important. It houses the 20- and 200-day moving average and the (38.2%) retracement of the rally since the March 9 low (~CAD1.3525).
• The Australian dollar rose to almost $0.6975 yesterday, its highest level since March 24. The ceasefire announcement sent to sharply higher. It reached $0.7085 and surpassed the (61.8%) retracement of the losses since the high on March 11 (~$0.7185). The $0.7100-25 area may be the next technical hurdle. It pulled back to around $0.7035 in the European morning but looks poised to recover in North America.
EM
• The dollar bled lower against the Mexican peso yesterday. It fell to about MXN17.6835, its lowest level since March 19. It settled on its lows and tumbled to about MXN17.4930 in the initial response to the risk-on mood spurred by the ceasefire announcement. It continued to grind lower and recorded the low near MXN17.4420 in European turnover. The next technical area of note is around MXN17.40.
• The offshore yuan rose to its best level since the Middle East war began yesterday. The dollar peaked last week around CNH6.9270 and yesterday fell to about CNH6.8535. The ceasefire announcement saw the greenback fall to the low recorded in late February around CNH6.8265. The greenback was then sold to about CNH6.8215, a new three-year low. The PBOC set the dollar’s reference rate at CNY6.8680, a new low since April 2023 (CNY6.8854 yesterday and CNY6.9025 last Wednesday).
• The Indian rupee strengthened for the fourth consecutive session today, matching the longest streak since last June. The dollar gapped lower. Today’s high was about INR92.6915. Yesterday’s low was ~INR92.8650. The dollar settled below the 20-day moving average (~INR92.9270) for the first time since the Middle East war began.
Other Markets
• Equities applauded the ceasefire. The large bourses in the Asia Pacific region jumped 3-6%. Europe’s Stoxx 600 is up 3.7% in late morning turnover. US index futures are trading 2.5%-3.5% better.
• Benchmark 10-year yields are sharply lower. European rates are mostly 13-25 bp lower and premiums over German Bunds have narrowed. The 10-year JGB yield eased four basis points to 2.35%. The 10-year US Treasury yield is off five basis points to about 4.24%.
• Gold rallied with risk assets and reached nearly $4857, its best level in around two and a half weeks. It is trading near $4785 late in the European morning. Silver rose to $77.65, which is also a two and a half week high. It is near $76.80.
• May WTI settled near $112.95 yesterday and dropped to almost $91. Although it has steadied, it remains well below the 20-day moving average (~$99) for the first time since the Middle East war began.
Data
• The Federal Reserve met last month, a couple of weeks into the Middle East war, and policy was left steady, as widely expected. A record of that meeting will be published today. The updated Summary of Economic Forecasts saw the median dot remain with one rate cut this year. There was only one dissent, Governor Miran, though many had thought there could be two other dissents. The market heard a hawkish spin by Chair Powell. The Fed funds futures strip currently reflects expectations that the central bank will most likely spend the year on the sidelines.
• The eurozone’s February producer prices fell by 0.7% in the month before the new supply shock hit. The year-over-year fell to -3.0% from -2.0%, the most deflation since October 2024. The year-over-year rate was last positive in July 2025. However, the consumer was already pulling back before the war began. Retail sales slipped by 0.2% in February, after easing by 0.1% in January. It is the first back-to-back decline since Oct-Nov 2024.
• After collapsing 11.1% in January, German factory orders rose a modest 0.9% in February. The median forecast in Bloomberg’s survey was for a 3.0% gain. The construction PMI rose to 48 in March from 43.7 in February. It averaged 46.1 in Q4 25 and 44.6 for all of 2025 (38.8 average in 2024).
• The UK’s construction sector’s downturn slow in March. The construction PMI rose to 45.6 from 44.5 in February. It has not been above 50 since the end of 2024. It averaged 41.2 in Q4 25 and 43.3 in all of 2025 (54.8 average in 2024).
• Higher wages do not automatically translate into stronger Japanese household consumption. Labor earnings adjusted for inflation rose 1.9% year-over-year in February, marred slightly by the downward to 0.7% in January from 1.3% initially. The Bank of Japan has emphasized wage increases, but it is still one step removed from consumption. Yet yesterday, Japan reported that February household spending fell 1.8% year-over-year and after falling 0.5% in February 2025 and February 2024. The Bank of Japan meets toward the end of the month, and the swaps market downgraded the chances of a hike to about 55% from almost 75% a week ago. Separately, and true to the strong seasonal pattern, Japan reported an improvement in its February current account (~JPY3.93 trillion vs. JPY31 bln in January). The trade balance swung back into surplus (~JPY268 bln vs. -JPY600 bln in January). The trade surplus in February 2025 was JPY730 bln. The undervalued yen does not automatically translate into a trade surplus. Indeed, on a balance-of-payments basis, Japan has recorded an annual trade deficit for the last four years.
• The Reserve Bank of New Zealand stood pat with its official cash rate at 2.25%. It was only the second meeting since July 2024 that the central bank has not cut rates. The easing cycle appears over, and the swaps market is discounting the first hike by the middle of the third quarter.
• As widely anticipated, the Reserve Bank of India kept its repo rate at 5.25%. It reduced its policy rate by 125 bp last year. Governor Malhotra said the recently announced currency market curbs are temporary. The swaps market is pricing in 50 bp hikes over the next six months, which seems exaggerated.
Reviewed by Marc Chandler
on
April 08, 2026
Rating:
