The announcement, which included a pledge from Iran to reopen the Strait of Hormuz, constitutes a dramatic de-escalation from President Trump’s earlier statement that an entire civilization would die should an agreement not be reached. Brent crude fell as much as 16% and European natural gas by as much as 20% following the news. Despite a ceasefire having been agreed to, Bahrain, Israel, Kuwait, Saudi Arabia, and the United Arab Emirates all reported missile and drone attacks by Iran overnight, and it is not yet clear if the ceasefire will extend to Israel’s action against Hezbollah in Lebanon. Additionally, it is important to note that the ceasefire does not represent an agreement to end the war, only an agreement to suspend military action for two weeks while negotiations are ongoing. While President Trump did state that a majority of points for a full resolution have been agreed to, some Traders are hesitant to believe that this ceasefire will lead to sustained de-escalation. The most important question for the coming days will be to what extent shipping via the Strait of Hormuz recovers.

What to Watch This Week…

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NZD ⇑

The New Zealand Dollar is one of the G10’s biggest gainers versus the Buck on the ceasefire news this morning. Additionally, the Reserve Bank of New Zealand held interest rates at 2.25% at their policy meeting overnight, as was expected. Statements from RBNZ Governor Anna Breman following the policy decision were surprisingly hawkish compared to the previous meeting but reflect a shift in sentiment that we have seen from other Central Bank heads over the last month. Should long term inflation fail to remain around 2%, then the RBNZ is prepared to hike rates in a “timely” fashion.