USD

A two‑week ceasefire agreed between Washington and Tehran triggered a dramatic reversal in FX markets on Wednesday. Having opened around multi‑month highs, the dollar index slipped more than 1%, with traders anticipating that an imminent reopening of the Strait of Hormuz would unblock energy flows out of the region. Despite this, FOMC minutes released later in the day were decidedly hawkish; policymakers noted that war‑related energy shocks are likely to push inflation higher, and several participants were open to rate hikes if price pressures persist. With that risk in mind, tomorrow’s US CPI will be critical. We expect headline inflation to jump as higher fuel and commodity costs feed through, but core CPI should remain better‑behaved. However, a strong inflation print or any breach of the ceasefire could quickly rekindle safe‑haven flows, reversing the dollar’s recent slide, and that remains the primary concern top of mind this morning.

EUR

A surge in risk appetite sent EURUSD to a five‑week high near 1.17 on Wednesday. Ceasefire news allowed investors to unwind war‑driven energy hedges, seeing oil and gas prices plunge, equities rally, and the single currency rising sharply. That said, we think this strength rests on shaky foundations. FOMC minutes highlighted the Fed’s concern over inflationary spill‑overs from the Middle East, and US CPI data tomorrow poses an asymmetric risk: a strong print could re‑anchor the dollar and drag EURUSD lower. With no meaningful eurozone data scheduled, euro performance will hinge on global sentiment and developments in the Gulf. Our bias is that EURUSD will remain range‑bound in the mid‑1.16–1.17 area unless the truce holds longer than two weeks, in which case an extension toward 1.18 becomes plausible. Conversely, any renewed fighting or a hawkish US inflation surprise would see gains quickly eroded.

GBP

Sterling enjoyed its largest one‑day rise in several weeks on Wednesday, rallying to trade above 1.34 against the dollar and regaining ground against the euro. The bounce largely reflected the same dynamics that supported other risk‑sensitive currencies: the cessation of hostilities lowered energy prices and damped safe‑haven demand for the dollar. Domestically, however, news was less encouraging. The RICS UK housing survey, released overnight, showed the net balance of house prices plunging to –23 in March from –14 in February, the weakest reading since early 2024. Price expectations for the next three months fell to –43, and new buyer enquiries dropped sharply as the Iran war pushed mortgage rates higher. While the two‑week ceasefire has already led to a pullback in rate expectations, they remain well above pre‑war levels, and the survey underscores how geopolitical shocks are feeding through to the UK economy. With no major UK releases today, sterling will take its cue from US CPI and broader risk sentiment, leaving us cautious given the fragile ceasefire that is currently in place.

CAD

The loonie strengthened modestly as risk assets rallied on Wednesday, with USDCAD sliding toward 1.38. Lower oil prices would ordinarily weigh on an oil‑linked currency, but the dramatic improvement in risk appetite more than outweighed the drag from a 16% slump in crude, allowing the Canadian dollar to recoup some recent losses. Looking ahead, the spotlight remains on tomorrow’s US CPI and its implications for global risk sentiment. Locally, attention also turns to Canada’s March employment report, where we expect another soft, but positive, consistent with our expectation for the labour market to tread water. With oil still near $95 a barrel and the Middle East truce precarious, we see USDCAD trading in a 1.37–1.39 range; a strong US inflation print or renewed hostilities would lift the pair, while sustained risk appetite could push it lower.

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