Forex & Commodities Daily: Dollar Firms Ahead of Fed, Euro Hits 3-Year Low, Oil Rallies

Yesterday's April Consumer Confidence Index came in above expectations: the reading rose from 92.2 to 92.8 points against a preliminary estimate of 89.0, signalling that Americans remain confident in the economic outlook despite the ongoing energy crisis — an argument in favour of the Federal Reserve maintaining its current monetary policy stance. The week's defining event will be the Fed's policy decision, due today at 18:00 GMT. Analysts are confident the interest rate will be held in the 3.50–3.75% range, shifting the focus entirely to signals on the timing and direction of future monetary policy — and on the future role of Fed Chair Jerome Powell.

Powell may hint at his departure once his term expires on May 15, or announce his intention to remain as a regular member of the Board of Governors for another two years. In the latter scenario, he would likely form a significant internal opposition to new leadership in its efforts to reduce borrowing costs. Meanwhile, the Middle East situation continues to command market attention: despite the ceasefire extension ordered by President Donald Trump, no active hostilities have occurred in the region — but diplomatic efforts have also failed to produce results.

Iran's three-stage proposal — temporarily resuming oil tanker traffic through the Strait of Hormuz in exchange for lifting the US Navy's blockade of Iranian ports and postponing nuclear talks — was met with deep skepticism in Washington. The Wall Street Journal reported that the President has instructed aides to prepare for the continued implementation of a pressure strategy against Tehran through energy export restrictions, meaning the Strait of Hormuz will remain blocked and the consequences of the energy crisis on the global economy will persist for an extended period.

Eurozone

The Euro is gaining against the Yen but weakening against the US Dollar, with mixed dynamics against the Pound.

April Eurozone consumer and business confidence data released today came in weak: the composite indicator fell from 96.2 to 93.0 points — a sharper decline than the 95.2 forecast — hitting a three-year low amid the energy crisis, worsening dynamics in the services sector, and accelerating inflation. The data reinforces the case that stagflationary conditions are taking hold in the EU, potentially forcing the European Central Bank (ECB) to choose between fighting rising consumer prices and addressing the economic slowdown. Traders also took note of German inflation figures: the Consumer Price Index rose from 2.7% to 2.9% year-on-year against a preliminary estimate of 3.0%, while core CPI edged up from 2.8% to 2.9% versus a forecast of 3.1% — still well above the ECB's 2.0% target.

United Kingdom

The Pound is strengthening against the Yen but weakening against the US Dollar, with mixed dynamics against the Euro.

With no significant domestic data releases, price action is being driven by external factors. It is worth noting that the National Institute of Economic and Social Research (NIESR) has published a report projecting UK GDP growth of just 0.9% this year, down from a prior estimate of 1.4%, and 1.0% in 2027 versus a previous forecast of 1.3%. The US–Iran standoff is expected to push inflation to 4.1% next year, with consumer prices only returning to the Bank of England's 2.0% target by 2028 — implying just one rate hike this year. At tomorrow's meeting, borrowing costs are likely to be held at around 3.75%, though subsequent official remarks may shed light on the timing of future adjustments.

Japan

The Yen is weakening against its major peers — the Euro, the Pound, and the US Dollar. Tomorrow at 23:50 GMT, investors will focus on industrial production data — forecast to recover from –0.2% to 1.0% — as well as retail sales, which are expected to swing from –0.2% to 0.9%. Strong readings would significantly raise the probability of further monetary tightening by the Bank of Japan and lend support to the Yen.

Australia

The Australian Dollar is losing ground against its major peers — the Euro, the Yen, the Pound, and the US Dollar.

The key focus for investors and forex traders is Q1 inflation data: the Consumer Price Index rose from 3.6% to 4.1% year-on-year against a preliminary estimate of 4.2%, the trimmed mean measure increased from 3.4% to 3.5%, and the weighted median from 3.2% to 3.5% — all remaining above the Reserve Bank of Australia's (RBA) 2.0–3.0% target range. The data arrives ahead of next week's RBA meeting and could serve as a strong argument for a shift toward a more hawkish policy stance.

Oil

Oil prices are posting strong gains: despite the ceasefire extension ordered by President Trump, no active hostilities have occurred in the region — but diplomatic efforts have also yielded no results. Iran's three-stage proposal — temporarily resuming oil tanker traffic through the Strait of Hormuz in exchange for lifting the US Navy's blockade of Iranian ports and postponing nuclear talks — was met with deep skepticism by the White House. This means the Strait of Hormuz will remain blocked, and the consequences of the energy crisis on the global economy will persist for an extended period.

The bullish impulse was further supported by the American Petroleum Institute (API) report, which showed a drawdown of 1.790 million barrels against a forecast of just 0.300 million barrels. Meanwhile, the UAE's decision to withdraw from OPEC and OPEC+ effective May 1 had only a limited impact on oil prices. Analysts note that the country will attempt to increase production, but the hydrocarbon transportation problem currently appears unresolvable — so significant additional volatility is not expected.