Investors and forex traders are closely watching the geopolitical situation in the Middle East. The two-week ceasefire between the United States and Iran expires tomorrow, and for now both sides continue to send mixed signals to the market. According to preliminary agreements, the meeting is expected to take place in Islamabad, although a number of senior Iranian officials, including Parliament Speaker Mohammad Bagher Ghalibaf, had previously argued that under pressure — and in particular under the continuing blockade of Iranian maritime shipping — there was no point in resuming dialogue. Nevertheless, according to sources cited by The New York Times, Tehran will still send its delegation to Pakistan, where US representatives led by Vice President J.D. Vance are already expected.
Recent comments from White House head Donald Trump also failed to provide much clarity. In an interview with Bloomberg, he said that the ceasefire is unlikely to be extended, although media outlets had earlier described such a step as the most likely scenario. Trump even allowed for the possibility of direct hostilities resuming if a peace agreement is not reached. Markets will also be watching today’s hearing before the Senate Banking Committee, where Kevin Warsh will present his candidacy for the position of Chair of the US Federal Reserve. He is expected to deliver opening remarks, after which committee members will question him and decide whether to recommend his confirmation to the full Senate.
Notably, Warsh’s prepared remarks have already been published. In them, he promises that interest rate decisions will remain “strictly independent” of political considerations or comments from Republican administration officials, while also pointing to cooperation “with the White House and Congress on non-monetary issues within the regulator’s competence.” He also argued that further cuts in borrowing costs could be justified, as technological changes driven by the adoption of artificial intelligence are likely to raise labor productivity. This directly contradicts the view of most Fed officials, who continue to argue for a wait-and-see approach because inflation remains elevated.
Eurozone
The euro is strengthening against the yen, but weakening against the US dollar and the pound.
Today, economic sentiment data for the eurozone from the ZEW Center for European Economic Research were released and came in weak. In April, the index fell from −8.5 points to −20.4 points, a deeper drop than the −12.7 points expected by analysts. The same indicator for Germany declined from −0.5 points to −17.2 points, versus an expected −6.7 points. The subindex of current economic conditions dropped from −62.9 points to −73.7 points, compared with preliminary estimates of −70.0 points. Commenting on the figures, ZEW President Achim Wambach said that businesses remain concerned about a long-term shortage of energy resources, which is holding back investment and reducing the effect of government stimulus measures. Also worth noting are today’s comments from European Central Bank Vice President Luis de Guindos, who said that the regulator should act cautiously when adjusting interest rates given rising global uncertainty related to the development of the US-Iran conflict.
United Kingdom
The pound is strengthening against the yen and the euro, but weakening against the US dollar.
Investors are focused on the February labor market data. The unemployment rate fell from 5.2% to 4.9%, while employment growth slowed from 84.0K to 25.0K. At the same time, average wages declined less than analysts had expected: including bonuses, wage growth slowed from 4.1% to 3.8% rather than 3.6%; excluding bonuses, it eased from 3.8% to 3.6%, compared with a forecast of 3.5%. Overall, the situation still appears stable despite slower hiring, while inflation is showing signs of acceleration. Together, these factors could provide the Bank of England with arguments in favor of further monetary tightening. However, leading economists surveyed by Reuters take a different view, believing that borrowing costs will remain unchanged through the end of the year. Respondents also highlight a growing risk of stagflation in the coming months, defined as a combination of weak economic recovery with a significant increase in unemployment and consumer prices.
Japan
The yen is losing ground against its main rivals — the euro, the pound, and the US dollar.
Today, the Bank of Japan published its semiannual financial stability report, stating that authorities need to closely monitor risks связанных with developments in the Middle East, since a prolonged US-Iran conflict could once again lead to higher energy prices and a rise in corporate bankruptcies. Tomorrow at 01:50 (GMT+2), investors will turn their attention to foreign trade data: exports are expected to grow by 11.0%, while import growth is forecast to slow from 10.3% to 7.1%. The trade balance is likely to improve to 1.106 trillion yen, which could provide support to the national currency.
Australia
The Australian dollar is losing ground against the euro, the pound, and the US dollar, while showing mixed dynamics against the pound.
In the absence of key economic releases, price action is being driven by external factors. Still, it is worth noting the statement from the management of National Australia Bank (NAB), which said it expects the cost of credit impairment to double to 706.0 million Australian dollars in the first half of the current financial year, primarily due to the Middle East conflict.
Oil
Oil prices are trading in narrow sideways ranges today.
Most market participants still hope that the new round of peace negotiations between the United States and Iran in Islamabad will take place and produce positive results. However, the scenario in which hostilities resume remains very much alive. As analysts note, the physical shortage of crude caused by the blockade of the Strait of Hormuz has now persisted for a second month and is being offset only by the release of 400.0 million barrels from strategic petroleum reserves by members of the International Energy Agency (IEA), as well as by the redirection of 25.0% of oil produced in the Persian Gulf from maritime transport to pipelines.
Even so, these measures will clearly not be enough to cover current market demand. In this context, the recent statement by IEA Executive Director Fatih Birol that the world is now experiencing the largest energy crisis in history appears logical. It is also worth noting that local support for prices today may come from the weekly inventory report of the American Petroleum Institute (API): stockpiles are expected to decline by 1.000 million barrels after rising by 6.100 million barrels a week earlier.
