The market has absorbed the escalation of hostilities in the Middle East with relative composure. The response in the capital markets has been relatively subdued, with a noticeable contraction in risk appetites, as evidenced by the declines in equities. The dollar exhibits strength against the majority of currencies, although the yen has rebounded from its lowest point of the month. Crude oil exhibits a firmer stance; however, the front month contracts for both WTI and Brent remain confined within the ranges established yesterday. Many investors seem to acknowledge the tenuous nature of the ceasefire, yet they remain optimistic that a resolution to the conflict may be forthcoming. The latest reports indicate that the control of the Strait of Hormuz continues to be a significant concern. Despite the fact that neither Iran nor the United States has ratified the UN Law of the Seas, both appear to be asserting its authority. The strait is a natural waterway; however, at its narrowest point, measuring 21 miles in width, it falls within the territorial waters as defined by UN law.

The euro’s narrow range of approximately a quarter-of-a-cent that existed prior to the North American session yesterday was slightly extended in both directions. The euro initially appreciated to a six-session peak, slightly exceeding $1.1660, before reversing course and declining beneath $1.1625. Recent escalations in the Middle East have resulted in the euro declining to a weekly low, approaching $1.1585. It recovered but stalled near 1.1620 in the European morning. It continues to exhibit signs of susceptibility. The dollar moved slightly above JPY159.50 during North American trading yesterday. This marks a new peak for the month against the yen, occurring even as the US 10-year yield has declined for the fifth consecutive session. It reached JPY159.65 today in the local session before being sold to nearly JPY159.35 in Europe. It did not experience a decline below JPY159.20 yesterday. Japanese officials have remained notably silent as the yen approaches the JPY160 threshold. The Ministry of Finance is set to unveil the official figures tomorrow regarding the intervention that has taken place over the past month.

Sterling reached a seven-session high on Monday, approximately $1.3510, which was slightly below the retracement objective of around $1.3520. It retreated to 1.3435 on Tuesday and nearly 1.3415 yesterday. It was sold today and briefly traded below the $1.3380 support level during the Asian session. It rebounded to approximately $1.3410 before encountering a halt. It appears susceptible unless it can regain a position above $1.3420-35. The Canadian dollar persists in exhibiting substantial trading activity. It has attained a new low not seen since April 13 today. The greenback rose a little above CAD1.3870 today. While CAD1.3900 presents immediate resistance, a breach above this level may catalyse a progression toward CAD1.3950. Throughout the 20 sessions this month, the Canadian dollar has depreciated in all but three instances. The Canadian dollar’s approximately 2.1% decline this month surpasses that of the Japanese yen, making it the weakest currency in the G10.

The Australian dollar struggled to rebound from the selling pressure triggered by yesterday’s disappointing April CPI figures, particularly against the backdrop of the Reserve Bank of New Zealand’s hawkish stance. The Australian dollar’s 0.5% decline positioned it at the lowest among the G10 currencies yesterday, whereas the New Zealand dollar experienced an increase of nearly 1%, marking the highest gain within the group. The Australian dollar is experiencing significant trading activity today, having briefly dipped just below $0.7100. Initial risk extends to last week’s low near $0.7080. Options for approximately A$545 million at $0.7115 are set to expire today.