Following what appeared to be a market tease before the weekend regarding the potential “winding down” of military operations, President Trump delivered an ultimatum to Iran that poses a risk of escalating the conflict. A 48-hour ultimatum has been issued, set to expire around 7:45 pm today. If the Strait of Hormuz remains closed, there will be attacks on Iranian power plants. Recent reports indicate that Iran has executed new strikes throughout the region today. Equities and bonds have faced significant declines. The dollar is experiencing a significant upward movement. Gold and silver are presenting fresh opportunities. The potential for a substantial escalation in the conflict is likely to dissuade investors today. The current sentiment indicates a lack of willingness to engage in risk-taking activities. As we observed at the onset of the conflict, should this escalate into World War Three, the market is favoring dollars.
The euro experienced a decline as the weekend approached. It had moved past $1.16 following last Thursday’s ECB meeting. While it continues to operate within the range established last Thursday (~$1.1445-$1.1615), it has dipped below $1.15 in Europe and appears ready to challenge the lower boundary. Options totaling approximately 2.55 billion euros, with a strike price of $1.15, are set to expire tomorrow, while an additional set of similar value will expire on Wednesday. The recent low, established earlier this month, was approximately $1.1410, marking a significant point since last August. The market remains focused on the JPY160 barrier, and the ongoing conflict coupled with the rise in US interest rates could motivate short-term players to break through this level. The price is approaching the JPY159.65 level during the European morning session. We anticipate that profit-taking may occur once it is breached, and we expect the JPY160.40 level to serve as a ceiling.
A notable increase in rates following the Bank of England meeting appeared to bolster sterling last Thursday, bringing it to approximately $1.3465. It has established a position above the 20-day moving average for the first time since mid-February. Despite the ongoing increase in rates leading up to the weekend, sterling struggled, retreating to $1.3300. It has reached a price of approximately $1.3260 thus far today. Following a rejection from the upper limit of this month’s range last week, sterling is now positioned to explore the lower boundary, located near $1.3220. The Canadian dollar experienced a minor decline last week, positioning it as the weakest performer in the G10, as it was the sole currency that did not appreciate. The greenback is testing the CAD1.3750 level, which represents the upper boundary it has maintained since late January. The initial potential could reach the range of CAD1.3800-25.
The Australian dollar fluctuated within the range of $0.7000 to $0.7100 for the majority of last week. It deteriorated at both ends by approximately a fifth of a cent. The asset experienced a weak settlement, and subsequent selling pressure pushed it to new monthly lows, approaching $0.6910. Last month’s low was approximately $0.6900. A decisive break may lead to an additional cent decline.