Forex News

• WTI plunges around $91.00 on Wednesday, down 8.91% on the day, after Axios reported a possible agreement between the United States and Iran.
• The proposed deal would reportedly include a gradual lifting of restrictions in the Strait of Hormuz and an easing of US sanctions on Iran.
• The sharp improvement in market sentiment significantly reduces the geopolitical risk premium embedded in Oil prices.

West Texas Intermediate (WTI) US Oil falls sharply on Wednesday and trades around $91.00 at the time of writing, posting an 8.91% daily decline as markets rapidly reassess geopolitical risks in the Middle East following reports from Axios suggesting major progress between the United States (US) and Iran.

According to Axios, Washington and Tehran are close to reaching a memorandum of understanding aimed at ending the conflict and opening a broader negotiation period regarding Iran’s nuclear program. The discussions reportedly include a gradual lifting of restrictions around the Strait of Hormuz, an Iranian moratorium on nuclear enrichment, as well as an easing of US sanctions alongside the release of billions of dollars in frozen Iranian funds.

The US news outlet added that the White House expects Iran to respond on several key points within the next 48 hours. A Pakistani source involved in the diplomatic efforts also confirmed to Reuters that both sides were “very close” to finalizing a deal.

The developments triggered a strong risk-on move across financial markets and led to a sharp decline in Oil prices, as investors rapidly unwind the geopolitical risk premium linked to potential supply disruptions.

The Strait of Hormuz remains a strategic chokepoint for the global energy market, with roughly one-fifth of global Oil flows transiting through the passage. Any lasting improvement in the regional situation mechanically reduces fears of disruptions to crude exports.

The bearish move accelerated after US President Donald Trump stated that “Project Freedom”, the operation aimed at fully restoring commercial shipping through the Strait of Hormuz, would be temporarily paused to allow diplomatic negotiations to proceed. US Defense Secretary Pete Hegseth also stated that the US-Iran ceasefire “certainly holds for now”, while emphasizing that Washington was not seeking renewed escalation.

The decline in Oil prices comes despite still-tight physical market fundamentals. The American Petroleum Institute (API) reported on Tuesday a decline of 8.1 million barrels in US crude inventories last week, far above the 2.8 million-barrel draw expected by the consensus. Goldman Sachs also warned that global Oil inventories are approaching their lowest levels in the last eight years.

However, in the short term, markets are clearly focusing on the improving geopolitical outlook, considering that a potential agreement between the United States and Iran could gradually normalize energy flows in the region and ease supply-related risks for global markets.

ING’s Warren Patterson and Ewa Manthey note Copper has edged higher, with LME prices back above $13,000/t as markets gauge the durability of the US-Iran ceasefire. They argue a prolonged Strait of Hormuz closure would raise energy costs and hurt manufacturing demand, leaving Copper headline-driven and needing stronger physical demand or inventory drawdowns for a sustained move higher.

Headline-driven trade and demand risks

"Copper edged higher as markets assessed whether the US-Iran ceasefire can hold. LME copper recovered on Tuesday afternoon from earlier losses in the session to trade back above $13,000/t. It’s supported by improved risk sentiment but capped by still-elevated exchange inventories, now close to the highest level since 2013."

"The main risk for metals remains a prolonged closure of the Strait of Hormuz. That would lift energy costs, add inflation pressure and weigh on manufacturing demand, limiting upside for industrial metals. Copper is likely to stay headline-driven, with stronger physical demand or inventory drawdowns needed for a more sustained move higher."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

According to Axios, the United States and Iran are moving towards a deal to end the conflict.

The news outlet claims that the deal would involve both sides lifting restrictions around transit through the Strait of Hormuz, in addition to Iran committing to a moratorium on nuclear enrichment and the US agreeing to lift its sanctions and release billions in frozen Iranian funds.

The US reportedly expects Iran to respond on several key points in the next 48 hours.

A Pakistani source involved in the peace efforts spoke to Reuters and cofirmed Axios' reporting, saying that they are very close to finalizing the deal.

Market reaction

Risk flows dominate the action in financial markets following this headline. The US Dollar Index loses more than 0.6% on the day near 97.90 and US stock index futures rise between 0.65% and 1.1% on the day.

Gold also benefits from this development and gains about 3% on the day near $4,700.

• EUR/USD jumps more than 0.5% on Wednesday, hitting session highs above 1.1770.
• Eurozone producer price inflation soared in March amid the impact of the US-Iran war.
• Trump hinted at a swift end to the war and sent the safe-haven USD tumbling across the board.

The Euro (EUR) rallies more than 0.5% against the US Dollar (USD) on Wednesday, trading at 1.1760 at the time of writing, after hitting session highs at 1.1770. Growing hopes that the US-Iran war is nearing its end have sent the US Dollar tumbling, and the hot Eurozone Producer Prices Index (PPI) data provided additional support to the Euro.

Data released by Eurostat on Wednesday showed that producer prices accelerated to a one-year high of 2.1% year-over-year (YoY) in March from -3% in February, well above the 1.8% expected. These figures confirm the inflationary pressures of Iran’s war and add to the case of an upcoming rate hike by the European Central Bank (ECB). Month-on-month, producer prices jumped to a nearly 4-year high to 3.4%, from -0.6% in the previous month, also beating expectations of a 3.3% increment.

A few hours earlier, the Eurozone's final HCOB Services Purchasing Managers Index (PMI) figures corroborated that the sector's activity contracted in April, albeit at a somewhat softer pace than previously thought; 47.6 vs the 47.4 preliminary estimations. German Services PMI has been left unchanged, at 46.9. The French and Italian services activity also showed figures consistent with shrinking business activity.

Investors, however, are celebrating comments by US President Donald Trump, who has paused the efforts to escort vessels through the Strait of Hormuz, claiming progress on peace negotiations with Iran. Previously, US Secretary of State Marco Rubio announced the end of the offensive stage, practically discarding a resumption of hostilities.

Technical Analysis: Bulls will meet resistance around 1.1790

EUR/USD shows a constructive near-term bias following an impulsive bullish reaction from Tuesday's lows at the 1.1675 area, although it remains contained within the last two weeks' trading range, below the 1.1790 area so far.

Momentum indicators have moved within positive territory. The 4-hour Relative Strength Index (RSI) is holding around 65, and the Moving Average Convergence Divergence (MACD) histogram, in the same timeframe, shows growing green bars, hinting at an increasing upside momentum.

Bulls, however, will be tested at the mentioned resistance around 1.1790 (April 20, May 1 highs), which closes the path to the April 17 high near 1.1850. Further up, the next target is the February 10 high, near 1.1930. On the downside, daily lows are at 1.1690, but the key support is in the area between 1.1645 and 1.1675, which has held downside attempts several times in April.

(The technical analysis of this story was written with the help of an AI tool.)

MUFG’s Derek Halpenny argues that recent USD/JPY moves likely reflect renewed Japanese Ministry of Finance intervention, with the pair dropping nearly three big figures after testing the 158.00 area. He warns that, given Middle East uncertainty and other unpredictable factors, this round of intervention may prove less successful in curbing upside momentum in USD/JPY than previous episodes.

Suspected MoF action drives sharp drop

"When considering the past behaviours of the MoF / BoJ in Japan regarding intervention, there is a strong likelihood that the Japanese authorities contributed to the broad sell-off of the US dollar with another bout of USD/JPY selling intervention."

"In all the past interventions, the MoF has never intervened just once. In 2022, intervention took place in September and October on a total of three separate trading days. In 2024, the MoF intervened twice at the end of April and beginning of May and then twice again in July 2024."

"Today, after hitting close to the 158-level, USD/JPY fell nearly three big figures and is of a scale that is consistent with actual intervention by the MoF. Finance Minister Katayama made clear on Monday that “bold action” can be taken in FX markets."

"If action has been taken today, the selling of the US dollar would have been reinforced by the decline in crude oil prices and increased hope of progress toward a peace deal. But we believe there remains a danger that these bouts of intervention could prove the least successful of any of the previous periods of intervention mentioned above. The Japanese authorities are more at the mercy of unpredictable factors than in the past."

"How the Middle East plays out will be crucial on whether upside momentum in USD/JPY fades. While there is optimism today over progress toward peace that could change suddenly at any time."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $76.78 per troy ounce, up 5.42% from the $72.83 it cost on Tuesday.

Silver prices have increased by 8.01% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 61.16 on Wednesday, down from 62.56 on Tuesday.

(An automation tool was used in creating this post.)

• The US private sector is forecast to have added 99K new jobs in April, up from 62K in March.
• If the data comes out in line with expectations, it would be the highest private-employment increase since July 2025.
• Strong employment-related figures would endorse the Fed’s hawkish pivot.

Developments in the Middle East conflict are likely to remain at the forefront this week, but investors will also keep an eye on a string of US labour market figures. One of the most relevant releases for April will be Wednesday’s Employment Change report by the Automatic Data Processing (ADP) institute, which is expected to show a 99K increase in net jobs in April, accelerating from the 62K advance seen in March.

If the report comes in line with expectations, the figures might bring some calm to the markets in a context of growing concerns about a stalled conflict in Iran, which has triggered a sharp increase in energy prices, boosting costs for US businesses.

The ADP report tends to set the stakes for the all-important Nonfarm Payrolls (NFP) report, which is normally published two days later. ADP figures are considered an approximation, signaling the labour market’s trend, rather than a sort of preliminary release, as both indicators normally show significant deviations.

Employment data might give some leeway to the Fed 

Labour figures will draw particular attention this month, as the US Federal Reserve (Fed) is pivoting towards a hawkish forward guidance, pressured by the escalating inflation pressures stemming from the US-Iran war.

The Fed left rates on hold last week, but three policymakers claimed to remove the “easing bias” language from the central bank’s statement, as, in their opinion, it is no longer appropriate to think about cutting interest rates considering the inflation outlook. Investors abandoned hopes of further rate cuts following the meeting, and the CME Group’s Fed Watch Tool is now pointing to a rate hike in mid-2027 as the Fed’s next move.

Apart from inflation, the labour market remains the other primary monetary policy goal of the Fed, and in that sense, further signs that employment creation gathers pace are good news. An upbeat ADP and, above all, Nonfarm Payrolls numbers this week would spare Fed policymakers the dilemma of having to choose between fighting inflation and promoting employment, and buy them time to assess the full impact of the Iran war on the US economy. 

When will the ADP report be released, and how could it affect the US Dollar Index?

The ADP Employment Change report for April will come out at 12:15 GMT. Market forecast anticipates a 99K increase in net jobs, which would be the strongest gain since July last year, following a 62K rise in March.

If these figures are confirmed, they might provide additional strength to the US Dollar, which is drawing support from the escalating tensions in the Middle East this week. A steady growth in employment eases pressure on the Fed to lower borrowing costs further and allows the central bank to focus on inflation, backing last week’s hawkish pivot.

The US Dollar Index (DXY) has been crawling higher this week, but it remains halfway through the monthly range. The Greenback seems to need a fresh catalyst to break this range, and a positive surprise in April’s employment numbers might be a good help. Weak ADP data, on the contrary, would weigh on the US Dollar, yet with downside attempts likely to remain limited as long as fears of a full-blown US-Iran war remain alive.

Guillermo Alcala, FX Analyst at FXStreet, sees the area above 99.00 as the main challenge for bulls: “The DXY is showing a moderate bullish momentum, but  it remains trading sideways, with the 99.00-99.20 area closing the way towards the 100.00 psychological level and early April highs at the 100.20 area.”

“Bearish attempts, on the contrary, are likely to find support above the 97.60-97.70 area unless positive development in the Middle East allows for some risk appetite to return. In that case, we could see the DXY aiming for February’s lows at the 96.50 area,” says Alcala.

OCBC strategists Sim Moh Siong and Christopher Wong highlight that the Reserve Bank of Australia’s latest 25 bps hike to 4.35% and a more balanced guidance underpin a constructive Australian Dollar outlook. With AUD now offering the highest carry in G10 FX and benefiting from its role as an energy exporter, the bank expects continued currency outperformance versus peers.

High carry and exporter status back AUD

"The RBA raised rates by 25bps to 4.35% in an 8-1 vote, a more decisive vote split from the prior 5-4 split and returning policy to a post-Covid high. The majority, including Governor Bullock, cited persistent upside risks to inflation and inflation expectations as justification for tightening."

"After three consecutive hikes, the forward guidance turned more balanced. The RBA now appears to be adopting a hike-and-hold approach, signalling a likely pause as it assesses the economic impact of higher fuel prices."

"With the AUD now offering the highest carry in G10 FX, its yield advantage, combined with its high-beta exposure as an energy exporter, should continue to support currency outperformance."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Rabobank’s FX Strategy team argues that current market pricing for up to three Bank of England hikes over the next year is excessive given a loosening UK labour market and lacklustre growth. They expect only one BoE move this year, which should weaken GBP and result in EUR/GBP drifting higher over a 9–12 month horizon.

BoE repricing to support EUR/GBP upside

"At the start of the Iran war, market pricing swung sharply from pricing in BoE rate cuts this year to pricing in as many as four rate hikes."

"However, the market still sees risk of three rate hikes on 1 year view. In Rabobank’s view, this is too many."

"The UK labour market has been loosening this year which indicates increasing levels of spare capacity and reduced risk of second order inflation effects taking root."

"We expect that the market will re-price in favour of just one BoE rate move this year which should see GBP soften."

"Our central view, however, is that EUR/GBP is likely to creep higher on a 9-to-12-month view."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)