Hope springs eternal, and the capital markets are trading on hope that the Middle East war ends shortly, even as missiles continue to be fired in the region. President Trump again hinted that the war may be winding down shortly. He will address the nation at 9:00 pm ET today. At a news conference today, UK Prime Minister Starmer announced plans for closer cooperation with the EU. Although by treaty, NATO is not obligated to get involved, any more than it did in the US long war in Vietnam, President Trump renewed his threat to leave the alliance. After the US threat earlier this year to take Greenland from a NATO member, the pact had been strained.
The Middle East War weighed on stocks and bonds and supported the dollar. If, and that may still be a big if, the war winds down, the markets are anticipating a reversal: a rally in stocks and bonds and a weaker greenback.
Prices
G10
• Option-related buying may have provided fuel but the hope of a soon end to the war in the Middle East set the path higher for the euro. It approached $1.1565 in North America yesterday, a retracement target of the losses since last week’s high (~$1.1640), which is also the next technical target. Options for 1 billion euros at $1.1650 expire tomorrow. It reached about $1.1610 European turnover today. Support is seen near yesterday’s high.
• The heightened verbal intervention on Monday and the dollar’s broad setback yesterday, coupled with lower US yields, pushed the yen to four-day highs yesterday. The greenback had briefly poked above JPY160.40 on Monday and fell to almost JPY158.65 yesterday. It settled below the 20-day moving average for the first time in over month. It is near JPY158.90 today, and it has encountered sellers around JPY159.00 today. Options for about $955 mln at JPY159.10 expire today. Follow-through selling today took it slightly below JPY158.30.
• Sterling set a new low for the year yesterday, around $1.3160, before it recovered back toward $1.3265. It held shy of Monday’s high (~$1.3285). It has traded to $1.3315 today. It probably takes a move above $1.3320, where options for almost GBP590 expire today, to lift the technical tone.
• The Canadian dollar also fell to a new low for the year yesterday before it recovered. The US dollar reached a little more than CAD1.3965. As US dollar pulled back broadly, it fell to a new session low in late dealings, slightly below CAD1.3910. Follow-through selling saw almost CAD1.3885 today. Options for $710 mln at CAD1.3900 expire today. If a high is in place, the greenback will likely ease toward CAD1.3840-50 and then CAD1.38 in the near-term.
• The Australian dollar held barely above Monday’s two-month low (slightly below $0.6835) and recovered to settle above Monday’s high (~$0.6890). It reached nearly $0.6955 today. Nearby resistance is seen around $0.6970 and the $0.7000-10 area.
EM
• The Mexican peso came storming back yesterday. Risk-on helped lift Latam currencies, which accounted for four of the top six emerging market currencies. The Hungarian forint and South African rand also enjoyed strong gains. The dollar made a marginal new high for the year against the peso and continued to hold below the 200-day moving average, which approached for the third consecutive session. The greenback reversed lower and settled below Monday’s low (MXN17.9855). The dollar has been sold to about MXN17.8150 today to fray the 20-day moving average. It has not closed below it since the Middle East war began. A convincing break could target the MXN17.70 area. Separately, note that in controversial meeting that saw the finance minister walk out of a meeting he voted in, the central bank of Colombia hiked its policy rate by 100 bp (to 11.25%), repeating January’s hike. The market had expected it, but the government opposed it. The dollar settled on session highs yesterday near COP3673. The Colombian peso is on the of the few currencies that have appreciated against the dollar since the Middle East war began.
• The offshore yuan recovered yesterday, and the dollar reached a four-session low, slightly below CNH6.8870. The greenback settled below the 20-day moving average (~CNH6.8955 today). Follow through selling today saw the US dollar approach the lower end of the recent range around CNH6.87. The PBOC seemed to have little choice today but set the dollar’s reference rate lower (CNY6.9025 vs. CNY6.9194 yesterday).
• Indian banks and forex market remained on holiday. They re-open tomorrow and are shut again on Good Friday.
Other Markets
• The rally in US equities yesterday and the optimism that the war will end shortly fueled sharp gains in Asia Pacific equities today. The Nikkei rallied more than 5% and South Korea’s Kospi surged 8.4%. Taiwan’s Taiex jumped 4.6%. Hong Kong and Australia gained more than 2%. Europe’s Stoxx 600 is up over 2%. If sustained, it will be the largest gain since last April. US index futures are 0.50%-0.70% higher.
• Bonds are also rallying. European benchmark yields are 4-7 bp lower and the 10-year US Treasury yield, which peaked last week near 4.48%, is now around 4.28%, off about three basis points.
• Gold is extending its recovery and reached almost $4748 today, its best level in nearly two weeks. It bottomed on March 23 slightly below $4000. Silver is lagging. It is struggling to maintain the upside momentum that carried it to about $75.60 today. In late European morning turnover, it is near $74.35.
• May WTI was sold to a three-day low near $96.50 earlier today but is hovering near $100. June Brent recovered from a four-day low (~$98.35) and is practically flat on the day in late European morning turnover near $104.
Data
• The market’s sensitivity to US labor market developments suggests the ADP private sector jobs estimate may be the most important data point today. It estimated that 63k jobs were added in February, the most in three months. In the first two months of the year, ADP figures suggest about 74k jobs were created in the private sector, roughly half of the job growth in Jan-Feb 2025. The war has made February retail sales less important than otherwise, but after a 0.2% contraction in January a 0.5% increase is projected by the median in Bloomberg’s survey. The ISM manufacturing survey and the final PMI manufacturing surveys are also on tap. Recall that the initial PMI estimate showed a modest gain to 52.4 from 51.6. It finished last year at 51.8. Lastly, March auto sales are seen ticking up slightly to 15.88 mln (seasonally adjusted annualized pace) from 15.75 mln in February. Last year’s high of 17.77 mln was record in March.
• Canada’s March manufacturing PMI is due. It has risen for the past three months to 51.0. It was below 50 last year after January and finished 2025 at 48.6.
• Mexico’s economy is struggling and that helps explain the Banxico cut rates last week despite the inflation overshoot. The March manufacturing PMI will be released today. It was above 50 one last year (August) and was at 47.1 in February after rising for two consecutive months. Mexico’s own IMEF surveys, also due, typically draw less interest. Lastly, Mexico reports February worker remittance, the top source of hard currency. Remittances appear to be gradually slowing. Last year’s monthly average was about $5.15 bln, down from the 2024 average of $5.40 bln. Seasonally, remittances have tended to be weak in February but improve in March.
• The eurozone’s final March manufacturing PMI was 51.6 vs. 51.4 initial estimate and 50.8 in February. It has risen each month in Q1. With the new energy shock, the streak may be challenged in Q2. Lastly, the eurozone’s February unemployment rate ticked up to 6.2% from the EMU-era low of 6.1% in January.
• The improvement in the UK’s manufacturing PMI stalled in February and March after rising four the previous four months. The 51.8 recorded in January was the strongest since August 2024. The flash estimated put it at 51.4 in March (51.7 in February) and the final reading stands at 51.0.
• Australia’s final March manufacturing PMI was weaker than expected. It slipped to 49.8 from 50.1, the lowest level since last October. It was 51.0 in February, and January’s 52.3, reading the best since the high was recorded last August at 53.0.
• Japan’s final March manufacturing PMI was edged up from the initial estimate of 51.4 to 51.6 (53.0 in February). More importantly, the BOJ’s Q1 Tankan survey was released. While sentiment improved slightly, expectations did not. Capex plans slashed (3.3% vs. 12.6% in Q4 25 survey).
• China’s RatingDog (formerly owned by Caixin) manufacturing PMI tends to have more elevated reading than the other one from the China Federation of Logistics. Earlier today, RatingDog reported that the manufacturing PMI slipped to 50.8 (from 52.1) compared with the CFL’s iteration standing at 50.4 (from 49.0). The RatingDog version averaged 50.3 in 2025 compared with CFL’s average of 49.6.
Reviewed by Marc Chandler
on
April 01, 2026
Rating:
