MARKET REPORT
Dollar Retreats as Trump Extends Iran Ceasefire
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- USD weakens across G10 as ceasefire extension and signs of Hormuz progress reduce haven demand
- No major data releases today; geopolitical headlines remain firmly in the driving seat
Recap
USD came under broad pressure after Trump announced an extension of the US-Iran ceasefire, dampening haven demand for the greenback. An Iranian official told local media the country had received "some sign" the US is ready to break the blockade in the Strait of Hormuz – adding to the positive tone, though the US blockade of Iranian ports remains in place until Iran presents a "unified proposal."
UK CPI for March came in at 3.3% YoY, meeting expectations, with the increase largely driven by energy price pressures from the Iran conflict. Services inflation remained sticky at 4.5% – above the 4.3% consensus – keeping the BoE in an uncomfortable position ahead of its April 30 meeting. GBPUSD edged up and GBPEUR was broadly flat. GBPNOK and GBPSEK were the notable movers, with GBP gaining 0.31% and 0.38% respectively as Scandinavian currencies lagged. ECB's Kazaks indicated the central bank is in no rush to adjust policy – a more cautious tone than seen from other ECB officials last week, causing some EUR weakness.
Today
Market rates
*Daily move - against G10 rates as of 5pm BST on 21.04.26
** Indicative rates - interbank rates as of 5pm BST on 21.4.26
Our thoughts
With no data releases today, FX markets will be driven entirely by geopolitical headlines. The ceasefire extension and early signs of Hormuz progress have reduced risk premiums, but the situation remains fluid. The US blockade stays in place until Iran presents a "unified proposal" – any stalling in that process would quickly reassert USD haven demand.
For GBP, the BoE remains in wait-and-see mode following yesterday's in-line CPI print, with services inflation running above forecast adding a layer of complexity ahead of the April 30 meeting. For EUR, the divergence within the ECB between hawks and doves is growing – Lagarde's commentary later this week will be key in setting the tone ahead of the April 30 policy meeting.
Tomorrow's flash PMIs are the next major data event – UK composite is expected to slip into contraction at 49.8 from 50.3, whilst the Eurozone composite is forecast to ease to 50.0. Until then, geopolitical newsflow is the only game in town.
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