MARKET REPORT
Dollar Weakens on Iran Peace Hopes as JPY Surges on Suspected Intervention
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- Trump signals progress toward a final Iran agreement and USD falls across G10 as risk sentiment improves
- JPY rallies sharply on suspected MoF intervention and USDJPY falls as much as 1.8%
Recap
USD edged lower as the fragile US-Iran ceasefire held following Monday's clashes, lifting risk appetite and trimming haven demand. GBPUSD gained 0.3% after two days of declines, whilst GBPJPY extended its climb for a third session. JPY is now the worst performing G10 currency year-to-date, gradually drifting back toward last week's intervention zone.
US data was mixed. The Atlanta Fed GDPNow index jumped to 3.74%, well above the 1.78% consensus, suggesting a strong Q2 rebound. However, Services PMI new business fell to its lowest since April 2024 whilst input prices hit their highest since December 2025 – the stagflation tension within the data remains uncomfortable. The SNB also signalled increased willingness to intervene in FX markets if CHF appreciation continues.
Overnight, the picture shifted materially. Trump announced he would pause US-led efforts in the Strait of Hormuz to allow time for talks with Iran, sparking a broad risk-on rally. USDJPY fell as much as 1.8% on what market participants widely believe to be further MoF intervention, with analysts noting the move had "all the marks of intervention".
Today
Market rates
*Daily move - against G10 rates as of 5pm BST on 05.05.26
** Indicative rates - interbank rates as of 5pm BST on 05.05.26
Data points
Click here for a calendar of upcoming economic events Our thoughts
Geopolitical developments are firmly in the driving seat again. Trump's decision to pause Hormuz operations to allow Iran talks is a significant development if progress continues, haven demand for USD recedes further and risk sentiment stays supported. The overnight JPY move adds another layer of complexity, with 157 now seen as the new intervention threshold, any USDJPY drift back toward that level will put authorities back on alert immediately.
On the data front, ADP employment change is today's key US release, expected at 79k from 62k previously – a useful read ahead of Friday's non-farm payrolls. The UK final Services PMI confirms at 52.0, providing no fresh impetus for GBP. French PMIs remain deep in contraction territory at 46.5 – a reminder that the Eurozone growth picture remains fragile ahead of the ECB's June decision.
For GBP, Thursday's UK local election results remain the key domestic risk of the week. A bad night for Labour adds political risk premium to sterling at a sensitive time. For USD, Friday's non-farm payrolls is the defining data event. Weak labour data alongside the Iran de-escalation narrative would extend USD weakness further and push GBPUSD higher still.
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