Asian Pacific indices end higher

US stock index futures were a touch lower overnight but then began to edge up as the European session progressed. This saw them add to yesterday’s gains even as investors considered President Trump’s deadline for Iran to reopen the Strait of Hormuz later today.

Source: TN Trader

Mr Trump said that the US military would destroy Iran’s bridges and power plants if the Strait of Hormuz remained closed after tonight’s deadline of 20:00 EDT. But he added that negotiations appeared to be taking place in good faith and that several countries are assisting efforts to bring the conflict to an end.

Reports indicate that the US, Iran and international mediators are discussing a possible 45-day ceasefire framework that could eventually lead to a permanent resolution. A separate plan reportedly brokered by Pakistan is also under review.

Aside from this, investors are also considering the likelihood of interest rate changes from the Federal Reserve. At the beginning of this year, the consensus view was that there would likely be two 25-basis point rate cuts in 2026, with the first coming in June.

But even before the war started, there was evidence that inflation was starting to pick up again, even though it was by all measures well above the Fed’s 2% target. Those inflation fears have only increased over the past month, particularly as what may have been a short war has turned into something more protracted, with oil prices stuck above $100 per barrel.

The current expectation is that the Fed will now keep rates unchanged, beyond year-end. Traders and investors alike will keep a close eye on tomorrow’s release of FOMC minutes from the last Federal Reserve monetary policy meeting, along with two key inflation updates, Core PCE on Thursday and CPI on Friday.

European stock indices were firmer across the board on Tuesday after investors returned from their four-day Easter break. US stock indices had a positive session yesterday and built on those gains in early trade this morning. These moves helped to drag European indices higher even as President Trump’s deadline for Iran to reopen the Strait of Hormuz edged closer.

Source: TN Trader

Mr Trump warned that the US would destroy Iran’s bridges and power plants within hours if the Strait remained closed beyond the deadline. But he also said that negotiations were continuing in good faith. Final Services PMIs from across the Eurozone and the UK were a bit of a mixed bag, with Italy and France both registering contraction across the sector. 

There was relatively little movement across FX markets this morning. Traders appeared to be sitting on their hands ahead of President Trump’s deadline for Iran to reopen the Strait of Hormuz.

Tehran has been given until 20:00 EDT tonight to ensure the safety of all shipping passing through this vital chokepoint. If they fail to respond, then Mr Trump has said that the US military will target Iranian power plants, bridges and no doubt other important pieces of infrastructure.

Despite this risk of a serious escalation in hostilities, the US dollar was weaker across the board this morning. Perhaps many traders feel that there’s a greater chance of a resolution being reached tonight than ramping up the intensity of the fighting.

The dollar has been a major beneficiary of ‘flight to safety’ flows since hostilities began at the end of February. Yet the cash Dollar Index has failed repeatedly to break and hold above key resistance at 100.00. This suggests that there are still question marks over the future direction of the greenback. If the Dollar Index fails to break free of 100.00, then the possibility of another significant drop in the US dollar can't be ruled out.

The USD/JPY pair touched a one-week high this morning but kept below the key 160.00 level. Japanese household spending declined 1.8% year-on-year in February, marking the third consecutive monthly decline, which weighed on the yen. Concerns that the Iran war could strain Japan’s economy through higher oil import costs also reduced expectations for a rate hike from the Bank of Japan.

Source: TN Trader

Gold was a touch firmer this morning and continued to dig in above $4,600 per ounce. In early trade last Thursday, gold traded briefly at $4,800 to hit its best level in a fortnight. But it subsequently slumped, dropping to $4,550 just a few hours later.

The precious metal has managed to recover since then, but there isn’t much power behind the rally, suggesting that investors aren’t wholly convinced that higher prices are on the horizon. Yet the daily MACD has turned up from relatively oversold levels, and this may give the bulls some confidence.

Source: TN Trader

Unfortunately, markets are no longer pricing in rate cuts this year as inflationary pressures have started to increase again, getting a recent boost from oil prices. This looks likely to provide a bit of a headwind in the near term. Last week's strong Nonfarm Payrolls report also reinforced expectations that the Federal Reserve could keep rates higher for longer.

Silver also suffered a sharp selloff last Thursday when it dropped from $75.90 to $69.55 during the first half of the trading session. Like gold, it has managed to steady since then and seemed content to trade either side of $72.50 this morning.

Source: TN Trader

A modest pullback in the US dollar is helping to support the price of silver. But traders are more mindful of the approaching deadline from President Trump. Tehran has until 20:00 EDT to reopen the Strait of Hormuz or face a renewed bombardment, this time targeted at such key infrastructure as power plants and bridges.

The binary outcome from this deadline only goes to complicate trading decisions, which suggests that many players may decide to sit on the sidelines for now.

Crude oil prices added to recent gains after President Trump reinforced threats to attack Iran’s civilian infrastructure if the Strait of Hormuz is not reopened by tonight’s 20:00 EDT deadline.

Last week, front-month WTI broke above resistance around $100 per barrel, although it hasn’t, as yet, retested its multi-year high of $115.75 hit this time last month. Meanwhile, front-month Brent continues to trade just a touch south of key resistance around $110 per barrel.

Source: TN Trader

The Strait of Hormuz has been off limits to most shipping since hostilities broke out at the end of February. This has caused a huge backlog of tankers waiting to cross the Strait, thereby cutting off the world, particularly the Asian Pacific region, from a significant amount of crude oil, liquefied natural gas and key chemicals required to produce fertilisers and the manufacture of semiconductors.

The longer the Strait of Hormuz remains closed, the worse the economic damage. And despite President Trump’s threats, it would be surprising if Tehran would want to agree to allow free passage through the Strait without extracting a high price. 

Bitcoin continues to trade within a range which has been building for two months now. Yesterday, it pushed up above $70,000 before pulling back a touch. This was the first time in around a fortnight that it had traded above this level.

Traders responded positively to reports of a possible 45-day ceasefire between the US and Iran. But this has now morphed into a deadline from President Trump, who has threatened to destroy Iranian power plants and bridges unless Tehran reopens the Strait of Hormuz by 20:00 EDT tonight (01:00 BST on Wednesday).