USD Slides as US-Iran Deal Boosts Risk Sentiment; Oil Drops

USD Weakens on US-Iran Deal, Risk Assets Rally

The US dollar opened the week lower, pressured by a surprise US-Iran memorandum of understanding (MOU) that signals a potential de-escalation in Middle East tensions. The agreement, mediated by Pakistan’s Shehbaz Sharif and confirmed by President Trump, outlines a 60-day negotiation period to formalize a peace deal, including the reopening of the Strait of Hormuz — a critical conduit for global oil shipments. Crude oil futures plunged 5.37% to $80.32, with prices nearing the April 17 swing low of $78.97.

Technical analysis highlighted EURUSD, USDJPY, and GBPUSD as key pairs to monitor, with traders assessing the impact of improved risk appetite. US equity markets surged in premarket trading, led by the Nasdaq’s 636-point gain, while Treasury yields retreated across the curve. The 10-year yield fell 2.49 basis points to 4.455%, reflecting reduced inflation concerns amid lower oil prices.

FOMC Meeting in Focus as Warsh Era Begins

Attention turns to Wednesday’s Federal Open Market Committee (FOMC) meeting, where new Fed Chair Kevin Warsh is expected to signal a shift toward less forward guidance and a more data-driven approach. While no policy changes are anticipated, markets are parsing his rhetoric for clues on future rate trajectory. Warsh’s skepticism toward quantitative easing and aggressive communication aligns with easing inflation pressures, as oil’s drop from $105 to $80 reduces upside risks to consumer prices.

Global Central Banks and Yield Curve Dynamics

Other central bank meetings this week include the Bank of Japan, Reserve Bank of Australia, Swiss National Bank, and Bank of England. The 2-year yield dipped to 4.051%, while the 30-year yield edged down to 4.955%. Gold rose 2.78% to $1,938, and Bitcoin climbed to $66,265, buoyed by dollar weakness and risk-on flows.

The USD’s decline reflects a broader pivot toward risk assets, though traders remain cautious on the Iran deal’s implementation. Key technical levels for oil include $77.50 and the 200-day moving average at $73.41, while the DXY faces resistance near 105.00.

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