Daily Market Pulse: Peace Deal & Hawkish Fed Drive Divergent Moves

A landmark US-Iran peace agreement and a hawkish Federal Reserve created a mixed landscape, with CAD strong and EUR weak amid varied currency reactions.

Today's trading session saw significant activity, reflecting a dynamic market environment. Our proprietary Market Readiness Score (MRS) registered 59, indicating a balanced outlook, while the Carry Trade Score (CTS) was notably high at 82.

Geopolitical Breakthrough

• A major development unfolded as President Donald Trump signed a memorandum of understanding between the United States and Iran. This agreement aims to conclude the conflict, according to InvestingLive and FXStreet reports.
• This peace initiative initially eased risk aversion, influencing early currency movements.

Central Bank Stances

• The Federal Reserve maintained stable interest rates but signaled a potential rate hike later in 2026. This "aggressive Fed" stance, noted by Investing, caused the dollar to gain almost 1% after earlier losses.
• Bank of Japan's Kihara indicated a readiness to respond "appropriately" to yen movements. Despite noting yen weakness in households, no new intervention signals were given, per InvestingLive. Yen bears became cautious amid intervention fears.
• The Indonesian Rupiah found support ahead of an anticipated policy decision from Bank Indonesia.
• The People's Bank of China fixed the USD/CNY reference rate at 6.8130, up from the prior 6.8096. China also launched the third tranche of its consumer trade-in stimulus fund, as weak retail data continued to pressure for stimulus.

Key Currency Dynamics

• The Canadian Dollar was the strongest currency today, experiencing a slight rise as fading risk aversion weighed on the US dollar.
• The Euro, our weakest currency, rebounded to trade above 1.1500 following the peace agreement advance. This occurred even as the Federal Reserve maintained rates.
• The Japanese Yen plunged as the Federal Reserve signaled a path of rate hikes. However, the US-Iran agreement also reportedly undermined the dollar against some pairs.
• The New Zealand Dollar gained ground, reaching near 0.5800. This came despite first-quarter GDP growth of 0.8% quarter-on-quarter, which was less than expected, according to InvestingLive.
• The Australian Dollar rose above 0.7000 after President Trump signed the US-Iran accord.
• The British Pound recovered from a two-month low ahead of the Bank of England's meeting. However, FXStreet reported the pound was "doubly hurt" by soft CPI and the aggressive Fed outlook.
• The US Dollar Index initially maintained losses after retreating from 11-week highs, influenced by the peace deal. It later reversed course, gaining almost 1% due to the aggressive Fed's stance.

Commodities Snapshot

• WTI crude oil maintained gains, holding above $75 a barrel. This occurred despite an easing of supply concerns.
• Gold prices fell to near $4,250, reacting to the Federal Reserve's signal of a potential rate hike this year.