MARKET REPORT
Sterling Steadies as Geopolitical Tensions Ease
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- US-Iran ceasefire agreement triggers broad dollar weakness, supporting risk-sensitive currencies across G10.
- Key data releases today include German factory orders, Swiss unemployment, UK construction PMI, and US mortgage applications.
Recap
USD fell against all G10 peers after the US and Iran agreed to a two-week ceasefire in exchange for Tehran reopening the Strait of Hormuz. Haven demand evaporated quickly, with the Dollar Spot Index dropping 0.8% to its lowest level since March 11. The agreement, reached just hours before a White House deadline, saw the yen strengthen and Treasury yields fall across the curve, with two-year notes declining seven basis points to 3.72% and markets adding to Fed rate cut bets as energy prices fell. GBPUSD was the standout mover, gaining 1.08.
Today
Market rates
*Daily move - against G10 rates as of 5pm BST on 07.04.26
** Indicative rates - interbank rates as of 5pm BST on 07.4.26
Data points
Click here for a calendar of upcoming economic events Our thoughts
German factory orders are the standout release today, with a sharp rebound to +2.00% MoM forecast after February's dramatic -11.10% collapse. A strong print would offer EUR some support and prompt markets to reassess European growth prospects. UK construction PMI is expected to slip further into contraction at 43.7 from 44.5 – ongoing weakness here reflects elevated borrowing costs and subdued investment appetite, and a miss could add modest downside pressure on GBP.
The two-week ceasefire window introduces an important caveat. It is not a resolution, and markets will remain sensitive to any signs of renewed tensions. The dollar's haven bid could return quickly if the situation deteriorates. Tonight's FOMC minutes will also be watched for any shift in the Fed's tone on inflation, particularly given the recent energy price spike.
Looking further ahead, German industrial production, US jobless claims, and the GDP revision all print Thursday, before US CPI lands on Friday. Volatility is unlikely to ease meaningfully between now and the end of the week.
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