Forex News

• Silver jumps sharply on Friday, rising more than 5% as the US Dollar weakens.
• The reopening of the Strait of Hormuz pushes Oil prices sharply lower, easing inflation concerns.
• Markets revive expectations of Federal Reserve rate cuts as energy prices cool.

Silver (XAG/USD) surges on Friday, trading around $82.60 at the time of writing, up 5.40% on the day as the US Dollar (USD) weakens and markets reassess the outlook for United States (US) monetary policy.

The rally in the precious metal comes as geopolitical tensions in the Middle East show signs of easing. Iran’s Foreign Minister Abbas Araghchi announced that the Strait of Hormuz has been declared completely open for commercial vessels during the current ceasefire period. The announcement marks a significant de-escalation after weeks of tensions around one of the world’s most strategic shipping routes.

Following the news, Oil prices dropped sharply as supply disruption fears faded. West Texas Intermediate (WTI) fell to around $80 per barrel, marking one of its steepest daily declines in recent weeks. The reopening of the strait is expected to restore more stable flows of Crude shipments through the Gulf, removing part of the geopolitical risk premium embedded in energy prices.

The decline in Oil prices is easing immediate inflation concerns and prompting investors to reassess the trajectory of the US monetary policy. Lower energy prices reduce pressure on consumer prices and increase the likelihood that the Federal Reserve (Fed) could deliver interest rate cuts later this year.

Markets are now pricing 38.2% chance of a 25-basis-point rate cut by year-end, up from 25.9% the previous day, according to the CME Fedwatch tool. Lower interest rates tend to support non-yielding assets such as precious metals, as they reduce the opportunity cost of holding them.

At the same time, the US Dollar remains under pressure. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is trading near multi-week lows around 97.80. The softer USD is making Silver more attractive for international investors and reinforcing the metal’s upward momentum.

Despite improving global risk sentiment following the diplomatic developments, the weakening US Dollar and renewed expectations of monetary easing are providing strong support for precious metals. Investors will now closely monitor developments around potential US-Iran negotiations over the weekend, as well as upcoming comments from Fed officials ahead of the blackout period preceding the next Federal Open Market Committee (FOMC) meeting.

Citing an Iranian official, Fars News Agency reported on Friday that if the US naval blockade persists, Tehran will consider it a violation of the ceasefire and close the Strait of Hormuz, per Reuters.

Market reaction

Although the immediate market reaction to this headline was largely muted, the US Dollar (USD) Index recovered slightly from the seven-week low it set near 97.60 earlier in the day. At the time of press, the USD Index was down 0.33% on the day at 97.85.

Nordea’s Henrik Unell maintains a constructive stance on the Swedish Krona, arguing that carry should be secondary to growth prospects and equity flows. After a war-driven spike in EUR/SEK and USD/SEK, improved sentiment, a steady Riksbank, and ongoing rotation from US to Swedish assets by households underpin expectations that SEK fundamentals will recover.

Sentiment, Riksbank stance aid SEK

"So far we haven´t changed the main story or the forecast for the SEK as the war has hopefully plateaued."

"Now that investor sentiment has recovered, we expect that macro fundamentals will do the same."

"The Riksbank will stay on hold for the rest of the year unless geopolitics throws another curveball and the situation escalates."

"The fact that monetary policy and the Riksbank are not acting preemptively or sounding alarm bells because gasoline prices are up should eventually benefit households."

"We believe that the lack of yield support is secondary to growth and equity flow data confirms that households continue to sell US assets and buy Swedish ones."

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

• EUR/USD edges higher as broad US Dollar weakness keeps the pair on track for a third straight weekly gain.
• De-escalation hopes between the US and Iran weigh on the Greenback as Iran reopens the Strait of Hormuz.
• Oil prices tumble nearly 10%, easing global inflation concerns.

The Euro (EUR) edges higher against the US Dollar (USD) on Friday as the Greenback comes under heavy selling pressure after Iran’s decision to reopen the Strait of Hormuz improved overall market sentiment and raised hopes for a potential US-Iran peace agreement.

At the time of writing, EUR/USD is trading around 1.1814 after hitting an intraday high of 1.1849, remaining on track for a third straight weekly gain.

Iran’s Foreign Minister Abbas Araghchi said on Friday that the Strait of Hormuz has been declared “completely open” for all commercial vessels for the duration of the ceasefire, in line with the truce in Lebanon. However, the reopening appears to be only partial, with commercial vessels allowed to pass through designated routes and subject to approval from the Iranian Revolutionary Guards Navy.

The move signals a notable de-escalation in tensions and could pave the way for further diplomatic progress between the US and Iran. Although uncertainty persists after US President Donald Trump said the naval blockade will remain “in full force and effect” against Iran until a final agreement is fully completed. He also said Iran is working with the United States to remove sea mines, helping restore safe passage.

In reaction, the US Dollar extended its decline, with the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major peers, trading near 97.74, its lowest level since February 27 and poised for a third consecutive weekly drop.

Crude prices also retreated sharply, with West Texas Intermediate (WTI) falling to its lowest level since March 10. At the time of writing, WTI is trading around $80.00, down nearly 10% on the day.

The pullback in Oil prices is easing immediate inflation risks, reducing pressure on central banks to tighten monetary policy. Markets are now pricing in roughly a 50-50 chance that the Federal Reserve (Fed) will deliver a 25 basis-point rate cut by year-end, while European Central Bank (ECB) tightening bets are being pared back.

Looking ahead, market attention will turn to a possible second round of US-Iran talks scheduled for the weekend. Trump indicated that he would consider extending the current ceasefire if both sides are close to reaching an agreement, adding that “they’ve agreed to almost everything,” including handing over what he described as “nuclear dust,” though this has not been confirmed by Iran.

Investors remain cautiously optimistic that a deal could be reached, raising expectations that the conflict may be nearing an end, although differences over nuclear issues are likely to keep uncertainty elevated and markets sensitive to incoming headlines.

Deutsche Bank’s Robin Winkler argues that German manufacturing faces an ongoing "China shock" as Germany’s trade deficit with China has reached a record size and now exceeds its surplus with the US. He notes that Germany’s relative price competitiveness versus China has recently stopped deteriorating, helped by Euro depreciation and rising Chinese producer prices, suggesting the bilateral trade balance may stabilize in coming months.

China shock pressure may be peaking

"We have long argued that the trade conflict with the US has been a distraction from the more existential threat to German manufacturing: the China shock."

"Indeed, while the trade surplus with the US has recently started to recover from the tariff- induced dip last year, the trade deficit with China has continued to soar. The deficit with China is now larger than ever before, and significantly larger than the surplus with the US."

"The good news is that the driver of the China shock has stalled lately: the decline in Germany's price competitiveness vis-à-vis China appears to be over."

"With this tentative reversal in relative producer prices, it is likely that Germany's trade balance with China will also stabilize in coming months. After all, the China trade shock has primarily been a price shock."

"That said, relative to China, German producer prices are now about 40% higher than a few years ago. German manufacturers thus face a long road toward restoring competitiveness."

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

Volkmar Baur at Commerzbank flags surging trade and current account surpluses in China, Taiwan and South Korea alongside weak currencies versus Euro (EUR) and, for the Won (KRW), even versus US Dollar (USD). He links this to systematic FX intervention that keeps real exchange rates low, warning that such surplus‑driven weakness shifts deficits onto other economies and dampens overall global growth.

Export surpluses and suspected intervention

"High growth rates and strong export performance should be pointing quite clearly toward currency appreciation."

"The most surprising aspect of the whole situation, however, is that this development has taken place in recent months without the currencies of these countries appreciating."

"Since the beginning of last year, the CNY has lost 5.5% against the euro, the Taiwanese dollar has lost nearly 9%, and the South Korean won has depreciated by 12.6% against the euro over roughly the past 15 months."

"The fact that this is not happening suggests that these countries are systematically intervening in their currency developments."

"According to the IMF, high surpluses driven by a weak currency therefore not only burden other economies, but also lead to lower global growth overall."

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

Danske Research Team reviews Sweden’s March inflation, highlighting a downside surprise in core inflation and energy, driven by a sharper-than-expected fall in electricity prices and broad food price declines. The team notes particularly weak dairy prices due to lower global prices and last year’s stronger currency, and still expects the full effect of April’s lowered VAT to show in upcoming food price data.

Energy, food and VAT effects in focus

"Final figures for March inflation confirmed the downside surprise in core inflation and energy. The larger decline in energy was attributed to a steeper fall in electricity prices than anticipated, while fuel prices surged as expected. Within services, holiday-related prices fell, accounting for most of the surprise in this category. "

"Food prices fell broadly and more than they usually do given the season. The decline was most prominent in dairy products, reflecting lower world prices and a stronger currency last year. "

"Even with the low March figure, we still expect full effect on food prices from the lowered VAT in April, and data from Matpriskollen confirm this view."

"It is important to note that Matpriskollen measures prices differently from Statistics Sweden, as it does not account for offers or sales campaigns, which Statistics Sweden does."

"However, since the reduced VAT impacts regular prices, Matpriskollen's predictions are likely to be more accurate than usual."

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

In a post published on Truth Social on Friday, United States (US) President Donald Trump said that they will get the "nuclear dust" from Iran, created by their B2 bombers.

"No money will exchange hands in any way, shape, or form. This deal is in no way subject to Lebanon, either, but the USA will, separately, work with Lebanon, and deal with the Hezbollah situation in an appropriate manner," Trump added and continued:

"Israel will not be bombing Lebanon any longer. They are prohibited from doing so by the USA. Enough is enough!"

Market reaction

Risk flows continue to dominate the action in financial markets on Friday. At the time of press, the Dow Jones Industrial Average was up 1.5% on the day, while the Nasdaq Composite and the S&P 500 indexes were both rising 1%.

BNP Paribas economist Hélène Baudchon compares the current Oil and gas price surge linked to the war in Iran with the 2022 energy shock. She argues that weaker demand and fewer supply constraints should limit inflationary pressure and growth damage versus 2022, while central banks’ faster reaction function and close monitoring of transmission lags will be key to containing second‑round effects.

Comparing current and 2022 energy shocks

"Will the same causes produce the same effects? In other words, will the outbreak of the war in Iran and the resulting surge in oil and gas prices lead to a comparable inflationary shock to the one seen in 2022? Will their negative effects on growth be the same as those for the war in Ukraine and the subsequent energy shock?"

"Today, inflationary pressure should be less strong, as demand is less dynamic and supply is less constrained. Therefore, the conditions are seemingly not met for a significant propagation of the rise in energy prices."

"However, this will need to be closely monitored as transmission lags matter, and the return to normal will take time."

"In addition, central banks have learned from the inflationary shock of 2021–2023. They are ready to react more quickly to counter any spillovers, any second-round effects and any spiral between price increases, inflation expectations and wages."

"We have selected a set of indicators to track the impact of this new energy shock, caused by the war in the Middle East, on activity and prices in the Eurozone, the United States, oil and gas markets and emerging countries, and to see how much the current situation resembles the situation in 2022 at the outbreak of the conflict in Ukraine."

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

In a video statement released on Friday, Israeli Prime Minister Benjamin Netanyahu said that they have the opportunity to make a historic deal with Lebanon, per Reuters.

Key takeaways

"I agreed to a temporary ten-day ceasefire with Lebanon."

"Our key demand is that Hezbollah must be dismantled."

"Israel has not agreed to Hezbollah demand to withdraw from southern Lebanon back to intenational border."

"We will remain in Lebanon with an extensive security zone up to the Syrian border."

"President Trump told me he is determined to continue blockade of Hormuz Strait and dismantle Iran's nuclear capabilities."

Market reaction

Markets remain risk-positive in the American session and the US Dollar Index stays in the lower half of its weekly range near 97.80, losing 0.4% on the day.