Forex News

John Williams, President of the Federal Reserve (Fed) of New York, spoke in Midtown Manhattan on Thursday and said the Fed’s current interest-rate setting is well calibrated for an economy facing additional risks from the conflict in the Middle East. He also claimed that the Iran war has presented the economy with new and unpredictable challenges.

Key takeaways:

War shock is about prices, but also unavailable commodities.

Some of market strength due to reduced us exposure to oil shock.

inflation expectations that are well anchored important

Cyber risk is the thing that keeps me up at night

Market pricing balancing strong US outlook versus war uncertainty.

The longer the conflict lasts, the bigger the economic impact will be.

Inflation will be well above 3% over next few months.

Now is not a good time for the Fed to give firm forward guidance.

We are in the right place for monetary policy.”

BNP Paribas notes Latin American central banks are responding differently to renewed inflation risks. The easing cycle seems over in Chile and Peru, while Mexico’s central bank may deliver one last cut if Middle East tensions ease. Brazil has started a gradual easing cycle, whereas Colombia is expected to be the only major central bank to hike short-term rates.

Policy easing pauses as Colombia tightens

"On the monetary front, the easing cycle appears to have come to an end in Chile and Peru."

"In Mexico, the central bank has not ruled out a final rate cut, provided the situation in the Middle East stabilises, with the next meeting scheduled for 7 May."

"Brazil’s central bank began its monetary easing in March, although it may proceed at a more gradual pace than initially anticipated."

"Finally, against a backdrop of ongoing inflation, Colombia stands out as the only major central bank in Latin America expected to raise its short-term interest rates."

"Fiscal policy remains predominantly restrictive across Latin American countries."

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

• USD/CHF rises as modest USD recovery pressures the Swiss Franc.
• Oil-driven inflation risks keep central banks on a cautious path.
• Initial Jobless Claims dropped to 207K in the week ending April 11, below forecasts.

USD/CHF edges higher on Thursday as the US Dollar (USD) stages a modest recovery after eight consecutive days of losses, putting pressure on the Swiss Franc (CHF). At the time of writing, the pair is trading around 0.7828, up nearly 0.11% on the day.

The move higher comes as the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, rebounds to around 98.20 after touching an intraday low of 97.83, though it remains near six-week lows reached earlier this week.

The uptick in the US Dollar appears largely technical following its recent decline, as risk appetite remains supported by cautious optimism surrounding US-Iran negotiations, reducing safe-haven flows into the Greenback.

Markets remain hopeful that a diplomatic breakthrough could be reached, with a second round of talks potentially taking place this week as Pakistan continues to push for negotiations. However, uncertainty persists, with fundamental disagreements over nuclear issues still unresolved.

At the same time, rhetoric remains firm, with US Defense Secretary Pete Hegseth warning that military forces are ready to resume combat if Tehran does not agree to a deal, as the current truce is set to expire next week.

Meanwhile, Oil-driven inflation risks remain front and center. Swiss National Bank (SNB) President Martin Schlegel said on Wednesday that “uncertainty regarding the inflation outlook is currently quite high,” noting that Switzerland’s exposure to external shocks has important implications for monetary policy. He added that “if second-round effects become apparent, central banks should act early and decisively.

Markets also digested the SNB’s March meeting minutes, which indicated that Swiss inflation is likely to increase in the short term due to higher energy prices, but is expected to remain within a range consistent with price stability.

In the United States, Federal Reserve (Fed) Bank of New York President John Williams said the Middle East conflict is already lifting inflation, adding that policy is “well positioned” despite challenges. Williams expects inflation to rise to around 2.75%-3% this year.

On the data front, Initial Jobless Claims fell to 207K, below forecasts of 215K, while Industrial Production dropped 0.5% MoM in March, missing expectations of a 0.1% rise and reversing the prior 0.7% increase.

Standard Chartered economists Carol Liao, Shuang Ding and Hunter Chan note that China’s Q1 Gross Domestic Product (GDP) grew 5.0% year-on-year, above the 4.8% consensus, supported by strong exports and a rebound in fixed asset investment. They highlight stabilising domestic demand, an end to Producer Price Index (PPI) deflation, and expect no near-term rate cuts as the government maintains its current policy stance.

Q1 strength reduces easing prospects

"China’s Q1 growth surprised to the upside on stabilising domestic demand and strong exports. Exports expanded by 14.7% y/y, underpinned by China’s continued competitiveness, tariff reductions and robust demand for its new‑energy and AI‑related goods."

"Fixed asset investment (FAI) growth turned positive at 1.7% y/y in Q1, a sharp rebound from ‑12.8% in Q4-2025, as infrastructure and manufacturing investment recovered on front‑loaded fiscal spending."

"Retail sales showed signs of stabilising, with growth accelerating on a q/q basis. However, the housing market remained under pressure, with deep contractions seen in investment, construction and sales."

"March data softened slightly, largely reflecting Lunar New Year seasonality, base effects from 2025 and a possible early impact from the Middle East conflict. Retail sales growth slowed after the holidays, while export growth eased after a strong showing in January-February (on front‑loaded shipments ahead of the Lunar New Year)."

"At the Politburo meeting in late April, we expect policy makers to highlight potential risks from a prolonged Middle East conflict and the need to reserve policy space to respond. However, given solid Q1 growth and the flexible growth target this year, the government will likely focus on implementing policies already adopted and refrain from stepping up policy support in the near future."

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

• Silver edges lower on Thursday as investors remain cautious while awaiting progress in Washington-Tehran negotiations.
• Oil-driven inflation risks support a cautious Fed stance, limiting the upside for precious metals.
• Ongoing disruptions to energy supply in the Middle East continue to provide an underlying floor for metals.

Silver (XAG/USD) trades slightly lower on Thursday, hovering around $78.60 at the time of writing, down 0.49% on the day. The white metal nevertheless remains close to its recent highs, as investors adopt a wait-and-see stance amid ongoing negotiations surrounding the war between the United States (US) and Iran.

Markets are closely watching diplomatic signals regarding a possible agreement between Washington and Tehran. Recent reports suggest that an extension of the ceasefire could be considered to allow more time for negotiations, which is modestly improving market risk sentiment. This prospect temporarily reduces demand for safe-haven assets such as Silver.

However, uncertainty remains elevated. Several officials indicated that progress has been made in some areas, but significant disagreements persist, particularly on nuclear-related issues. In this environment, investors remain cautious and avoid taking strong directional positions on precious metals.

Meanwhile, developments in energy prices remain a key factor for Silver. Tensions around the Strait of Hormuz continue to disrupt global Oil supply, keeping Crude prices elevated despite a recent pullback. This situation fuels concerns about an energy-driven inflation shock.

These inflationary pressures complicate the task of the Federal Reserve (Fed), which may be forced to maintain a restrictive monetary policy for longer than previously expected. Higher interest rates typically limit the appeal of non-yielding assets such as Silver.

Fed of St. Louis President Alberto Musalem said that current supply shocks risk undermining the Fed’s inflation and employment objectives. He added that the current interest rate range is likely appropriate for the time being, noting that the Oil shock could keep core inflation close to 3% through the end of the year.

In this context, developments in US-Iran negotiations and the trajectory of Oil prices are likely to remain key drivers for Silver in the near term.

BNY’s Bob Savage notes that Japanese equities have reclaimed record highs, but international allocations to Japan and Japanese Yen (JPY) hedges have not fully normalized. JPY remains pressured by persistent foreign hedging and limited Japanese outflows. Savage argues that potential Ministry of Finance (MoF) intervention will be less effective until hedges unwind, leaving Bank of Japan (BoJ) rate hike expectations as a key driver for the US Dollar (USD) and Japanese Yen in coming weeks.

Hedge overhang tempers intervention impact

"The Japanese Nikkei share index has rallied to set a new record highs, erasing all the losses from the Iran war. However, our holdings data suggest that investors are not back to February highs. International investors’ asset allocation to Japan was close to the MSCI ACWI index before the conflict, but not today."

"JPY holdings mostly reflect the hedging of Japan investments abroad. The FX positions are balanced against foreign hedging, which our data show restarted in the last week of March. The holdings figures suggest Japanese outflows into the U.S. and other markets have not been as large as the inflows, adding to pressure on JPY."

"The risk of intervention by Japan’s finance minister will have less effect until those hedges unwind – with the basis trade in JGBs against U.S. bonds part of the narrative. As such, BoJ rate hike risk should be a key factor for the weeks ahead in setting the course for the dollar."

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

ING’s Warren Patterson and Ewa Manthey note that Oil prices are drifting lower as markets price in a possible extension of the US–Iran ceasefire and renewed peace talks, even as physical supply tightens due to disrupted flows through the Strait of Hormuz. They highlight record US Oil and refined product exports, limited US drilling response, and a growing divergence between Brent futures and the physical market.

Physical tightness contrasts with softer futures

"The oil market continues to edge lower amid hopes that the US and Iran extend their ceasefire by another 2 weeks, along with a potential resumption in talks to bring an end to the war. However, the physical market is becoming tighter every day that passes without a restart of oil flows through the Strait of Hormuz."

"After taking into consideration pipeline diversions and the trickle of tankers through the Strait of Hormuz, we estimate that roughly 13m b/d has been disrupted. But with the US blockade, this number could creep higher."

"The divergence between the futures and physical markets is clear: dated Brent traded around $117/bbl, while front-month Brent futures settled a little below $95/bbl yesterday. The key upside risk for the market is that peace talks between the US and Iran break down."

"With buyers shifting toward US barrels, the domestic market is set to tighten as long as Middle East disruptions persist, likely prompting a supply response from US producers. US drilling activity, however, has barely moved since the start of the conflict."

"The lack of drilling activity also ties in with the EIA’s domestic crude oil production forecasts, which suggest little change in output this year. If we see a pickup in US drilling activity, it would have a more meaningful impact on oil output over 2027."

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