It was another big day for stock markets as the market continues to price in peace. We have to be over 90% priced to a peace deal at this point and dangerously close to a 'sell the fact' trade.S&P 500 +1.2%Nasdaq Comp +2.0%Russell 2000 +1.3%DJIA +0.7%Toronto TSX Comp +0.6%Travel and memory names led the way along with big time help from most of the Mag7. The laggards were oil companies.
Source: Finnhub
The International Monetary Fund has downgraded its 2026 global GDP growth forecast to 3.1% from a previous estimate of 3.3%, a move that carries significant implications for currency markets. IMF Chief Economist Gourinchas noted that absent the Iran conflict, the forecast would have been upgraded to 3.4%, underscoring the geopolitical drag on the global economy. The 3.1% reference case already incorporates elevated oil prices and short-lived supply disruptions. However, under an adverse scenario with oil reaching $100 per barrel, global growth could slow to just 2.5%, raising stagflation concerns. The downgrade weighs on risk sentiment and may pressure growth-sensitive currencies such as AUD and NZD, while traditional safe havens like JPY and CHF could benefit. The USD faces a mixed outlook — safe-haven demand may provide support, but weaker global growth dampens the Fed's tightening narrative. Oil-linked currencies including CAD could see volatility depending on which scenario materializes. Traders should monitor geopolitical developments in the Middle East and upcoming central bank communications for directional cues across major pairs.
EURUSD
USDJPY
USDCHF
AUDUSD
NZDUSD
USDCAD
Sentiment:
Negative
Source: Finnhub
The US naval blockade of the Strait of Hormuz, a critical chokepoint for global oil shipments, is creating geopolitical tension with direct implications for oil-linked currency pairs. On the first day of the blockade, three tankers transited the strait into the Persian Gulf, reportedly not heading to Iranian ports and therefore not intercepted. However, the vessels are believed to have ties to Iran, raising questions about enforcement consistency and potential escalation. The blockade threatens to disrupt approximately 20% of global oil supply transit, which could push crude prices higher and benefit commodity-linked currencies such as CAD and NOK, while weighing on oil-importing nations' currencies like JPY and INR. USD/CAD traders should monitor oil price volatility closely, as sustained crude strength typically supports the Canadian dollar. Near-term, WTI crude reactions will be the key transmission mechanism to forex markets. Escalation of the blockade or retaliatory actions by Iran could trigger safe-haven flows into USD, JPY, and CHF, adding further complexity to positioning.
USDCAD
USDJPY
USDCHF
Sentiment:
Neutral
Source: Finnhub
AUD/USD is trading with a bullish bias as the pair successfully defended a key psychological support level, signaling renewed buying interest from bulls. The technical outlook has shifted decidedly to the upside, with the path of least resistance now favoring further gains. Price action suggests that dip-buyers have stepped in aggressively near the critical support zone, preventing a deeper correction and establishing a firm base for a potential rally. The broader risk sentiment has been supported by developments in US-Iran diplomatic talks, with comments from Vice President Vance driving down oil prices and boosting risk-sensitive currencies like the Australian dollar. However, Australia's domestic outlook remains a concern, with business confidence plunging to -29 as geopolitical uncertainty weighs on the economic outlook. Traders should monitor resistance levels above the current range for confirmation of continued bullish momentum, while a failure to sustain gains could see the pair retest the recently defended psychological floor. Near-term direction will likely hinge on upcoming risk sentiment shifts and US dollar dynamics.
AUDUSD
Sentiment:
Very Positive
Source: Marketaux
Asia-Pacific forex markets saw mixed price action as renewed US-Iran diplomatic prospects lifted risk sentiment, with talks potentially resuming as soon as Thursday. Vice President Vance's comments drove oil prices lower and supported risk-sensitive assets across the region. US Treasury Secretary Bessent reinforced a 'wait and see' approach on interest rates, tempering expectations for near-term Federal Reserve action. China's trade data presented a mixed picture, with Q1 exports missing expectations while imports surged sharply, resulting in a significantly narrower trade surplus — a development with implications for CNY and broader Asian FX flows. The Australian dollar faces headwinds despite the improved risk backdrop, as domestic business confidence collapsed to -29 amid the Iran conflict shock hitting the economic outlook. HSBC flagged that a peace deal is essential to restore energy flows and curb inflation pressures. Traders should watch for further geopolitical developments and upcoming US rate guidance as key drivers for USD pairs and commodity-linked currencies in the near term.
AUDUSD
USDCNH
USDJPY
Sentiment:
Neutral
Source: Finnhub
AUD/USD faces significant downside pressure after Australian business confidence plunged to -29, marking its lowest reading since the COVID-19 pandemic. The sharp deterioration in sentiment has been driven by geopolitical shock stemming from the Iran war escalation, which has severely impacted the economic outlook. Adding to the bearish narrative, Q2 headline inflation remains elevated at approximately 5%, largely attributed to surging fuel costs linked to the conflict. The Reserve Bank of Australia has signaled uncertainty about whether current interest rate settings are appropriate to contain inflation, emphasizing the need to bring inflation back within the 2-3% target band. This hawkish ambiguity creates a complex backdrop for the Australian dollar, as persistent inflation argues against rate cuts while collapsing business confidence suggests economic weakness ahead. Traders should monitor AUD/USD for continued selling pressure, particularly if geopolitical tensions escalate further. The combination of deteriorating domestic confidence, elevated energy-driven inflation, and global risk aversion creates a notably bearish environment for the Aussie dollar against its major counterparts.
AUDUSD
AUDJPY
Sentiment:
Very Negative
Source: Finnhub
