It seemed clear that yesterday’s euphoric reaction to the two-week ceasefire was exaggerated. Ceasefires often have been plagued with disputes and violations at the start. This one is no different. At the same time, Israel’s action in Lebanon complicates the situation and there is some dispute whether it was covered by the ceasefire. President Trump has suggested that perhaps the US participates in the toll collection for the Strait of Hormuz.
Equities have seen yesterday’s surge pared. Benchmark 10-year bond yields are mostly firmer. The greenback has been largely confined to narrow ranges against the G10 currencies. Most are a little firmer, but not the Australian and Canadian dollars and Japanese yen. The JP Morgan Emerging Market Currency Index is practically flat. Drawing very little attention, the PBOC set the dollar’s fix at a new three-year low for the third consecutive session.
Prices
G10
• The euro poked a little above $1.1720 in North America yesterday, a modest extension of the rally seen in the Asia Pacific session in response to the ceasefire. After the high was recorded, the euro slipped back to around $1.1645, which was below the low seen in Europe. It recovered and settled near $1.1665. It has been confined to about a 15-tick band around yesterday’s settlement.
• The dollar fell by about 0.55% against the yen yesterday. It traded below JPY158 for the first time in two weeks but recovered to settle about JPY158.55, which was a little above the high seen during the European session. It has hardly traded below there today and is straddling the JPY159 area in late European morning turnover. Options for about $670 mln at JPY159 expire today.
• Sterling dipped below $1.3180 at the start of the week, and at yesterday’s peak, it had risen by slightly more than three cents to its best level in a month. It briefly pushed above the upper Bollinger Band (~$1.3465 today) for the first time since late January. Sterling pulled back to a around $1.3380 in the North American afternoon and settled around $1. 3395. It is in a $1.3380-$1.3415 range today.
• The US dollar recorded the session low yesterday against the Canadian dollar in the Asia Pacific session near CAD1.3825. It recovered to CAD1.3875 late in the European morning and consolidated in quiet though choppy activity in North America. The greenback is trading quietly today between about CAD!.3840 and CAD1.3860. Options for about $360 mln at CAD1.3890 expire today. A break of the CAD1.3800 area could see CAD1.3750 next.
• The Australian dollar reached $0.7085 in the initial reaction to the ceasefire news and spent the rest of yesterday consolidating above $0.7030. It hovered around the $0.7050 area for most of the North American session. It has held above $0.7020 but below $0.7050, where options for a little more than A$1.35 bln expire today. It entered today’s with a three-day 2.3% advance in today.
EM
• The Mexican peso rallied 1.5% yesterday. The greenback was sold to MXN17.36, its lowest level since March 3 and settled around MXN17.44. It had settled around MXN17.2270 before the war began. The dollar is trading quietly today and is little changed around MXN17.44-45 in late European morning turnover and has held below MXN17.50. The Mexican peso was stronger than the Colombian peso yesterday. But the greenback is weaker against the Colombian peso now than it was before the war started. The same is true of the Brazilian real. On February 27, the dollar settled near BRL5.1160, its lowest level since May 2024. Yesterday, the greenback gapped sharply lower and saw BRL5.0655. It closed near BRL5.0970 yesterday.
• The offshore yuan reached its best level since February 2023 yesterday. The dollar tested CNH6.82. It is consolidating in a narrow range today (~CNH6.8310-CNH6.8415). The low in 2023 was a little below CNH6.70. The PBOC set the dollar’s reference rate lower for the third consecutive session, and each one is a new low since April 2023. Today’s fix was set at CNY6.8649. Last Thursday, it was set at CNY6.8880.
• The dollar rose to INR92.9375 today, which filled the gap created by yesterday’s sharply lower opening. For the first time since the Middle East war began, the five-day moving average has crossed below the 20-day moving average. However, rather than signal a new downtrend, the crossing moving averages reflect the short squeeze that was triggered by the central bank’s currency restrictions on Indian banks.
Other Markets
• Equities are seeing yesterday’s sharp gains pared. Most of the equity markets in the Asia Pacific region fell, with the notable exceptions of the Antipodean and Taiwan’s markets. Europe’s Stoxx 600 rose almost 3.9% yesterday and has given back around 0.65% today. US indices rose 2.5%-2.8% yesterday and are off around 0.25%-0.35%
• Benchmark 10-year yields have recouped some of yesterday’s decline. The JGB yields edged up 1.5% bp, while Australia and New Zealand yields rose 5-7 bp. European benchmark yields are mostly 4-7 bp higher. The 10-year US Treasury yield is softer, slightly below 4.29%.
• Gold is firm near $4730 in Europe, and well off yesterday’s high (almost $4857). Silver is little changed as it hovers around $74.
• May WTI hit almost $91 yesterday and settled near $94.40. It is making session highs in late European morning turnover near $98.60. The 20-day moving average is around $99.25.
Data
• Usually, the US personal income, consumption data and the deflators would be the focus today. However, the February deflator readings are old as they cover the period before the Middle East war and the March CPI will be reported tomorrow. The optics of the consumption data will be better than the substance. Adjusting for inflation will keep real consumption expenditures hovering around the three-month average of 0.1%. The Atlanta Fed’s GDP tracker sese Q1 GDP at 1.3%. The median forecast in Bloomberg’s survey is more optimistic at 2.3%.
• Mexico reports March CPI today. It is likely to have accelerated further above the upper end of the 2-4% target range. The headline rate is seen rising to4.65% (from 4.02%) and the core rate may continue to hover near 4.50%. With inflation above target last month, the central bank not only cut rates but signaled it may do so again. Officials are clearly concerned about growth, and the record of last month’s meeting may offer insight into official thinking. Mexico will also report March vehicle production and exports. The data tends not to have much market impact, but it is noteworthy, that Mexico exports almost 80% of its output. Proportionately, that is around four times China vehicle exports.
• Germany reported February trade and industrial output figures earlier today. The trade surplus narrowed to 19.8 bln euros from 20.3 bln in January, but it stood at 17.7 bln in February 2025. Exports rose 3.6% on the month (-1.5% in January), while imports rose 4.7% (-5.1% in January). Industrial production fell by 0.3% in February, before the new energy shock. The median forecast in Bloomberg’s survey anticipated a 0.7% increase. Part of the sting was lessened by the upward revision in January’s reading from -0.5% to flat.
• China reports March PPI and CPI first thing tomorrow. The median forecast in Bloomberg’s survey is for PPI to have risen by 0.4% year-over-year. If so, that would be the first increase since September 2022. Consumer prices rose 1.3% year-over-year in February, the strongest since January 2023. It may have slowed slightly in March. Note that the core CPI, excluding food and energy, rose 1.8% in February, the strongest since early 2019.
Reviewed by Marc Chandler
on
April 09, 2026
Rating:
