Dealing With MidEast War Uncertainty and Digesting Purchasing Managers Survey, Japanese Tankan and U.S. Data Releases – Currency Thoughts

Dealing With MidEast War Uncertainty and Digesting Purchasing Managers Survey, Japanese Tankan and U.S. Data Releases

April 1, 2026

President Trump’s forever-shifting latest comments on the Middle East war project another likely 2-3 weeks to the conflict. Opening the Strait of Hormuz in such a way that shipping flow is secure and at a normal volume is his principal demand. This can be done either voluntarily by Iran or will be accomplished by a big, but brief, escalation of U.S. military force. A majority of private experts on Middle Eastern geopolitics appear skeptical that his goal can be achieved in a few weeks, but financial markets by and large have given Mr. Trump the benefit of the doubt. There’s been a pullback in the dollar and bond yields, and stock market losses have reversed significantly. However, the price of oil, which is most telling leading signal of likely future effect on inflation and growth around the world, has reversed less sharply and remains at levels that point to considerable damage.

The weighted DXY dollar index is 0.5% weaker on this first day of the second quarter. The U.S. currency has dropped 0.9% against the Swiss franc, 0.8% versus the kiwi, 0.6% relative to sterling and 0.5% against the euro, but is just 0.1% softer against the yen and Canadian dollar.

Stock markets in Asia today rallied 8.4% in South Korea, 5.2% in Japan, 4.6% in Taiwan, 2.0% in Hong Kong and 1.9% in Indonesia and Singapore. Australia’s market climbed 2.2%, and those in Germany, Spain and Italy each have bounced up at least 2.0%. U.S. gains 90 minutes into the trading day range from 0.9% in the DOW to 1.4% in the case of the Nasdaq.

Ten-year sovereign debt yields have fallen today by eight basis points in the U.K., six bps in Italy, four bps in Japan and France, and two basis points in Germany and the United States.

The per barrel price of WTI oil, which early on had retreated from $103.30 to $96.50, has crawled back up to $99.00. Those of gold and silver are 2.4% and 0.8% above Wednesday closing levels.

U.S. data out today have shown resilience but also confirm the risk of higher inflation.

• Retail sales in February grew 0.7% on month (most since July) and by 3.4% on year, greater than forecast and up from 2.4% in December.
• The S&P Global-compiled manufacturing purchasing managers index rose to a 2-month high of 52.3, which is comfortably within positive growth territory.
• The U.S. ISM-compiled manufacturing PMI unexpectedly improved to a 43-month high of 52.7 but included a 45-month high in the subindex of pricing pressure.
• The 62k rise reported in the ADP estimated private sector employment increase during March easily beat expectations. The February-March average monthly rise of 64k was more than 3.5% times greater than the mean of 17.5k in the four months through January.
• The main blemish on today’s U.S. data menu involved mortgage applications posting their third straight weekly plunge of more than 10.0%, accompanied by news for a fourth consecutive weekly rise in the 30-year fixed mortgage rate, which at 6.57% was roughly a half percentage point higher than 6.09% in the second half of Febru;ary.

The Bank of Japan’s quarterly Tankan survey of corporate conditions and future expectations was more upbeat about the present than had been anticipated but somewhat wary about what might lie ahead. Readings among large and small manufacturers and for small non-manufacturers were a bit above those in the prior December survey, and the score among all 9200 surveyed companies matched December. However, predicted results in the next survey due in June were lower in all cases, and projected business investment during fiscal 2026, which begins today, are well below spending levels last fiscal year.

Late yesterday came news of the central bank interest rate decisions at the Bank of Jamaica and Central Bank of Colombia. Jamaica’s interest rate was left steady at 5.5%. While CPI inflation there of 3.9% in February was hovering close to the 4% target, officials expect the fallout of the Mideast war to push such above target for much of this year. A split decision at the Central Bank of Colombia produced a majority of four votes for a full percentage point interest rate hike to 11.25%, set against two votes for a 50-basis point increase and one vote cast for keeping the rate unchanged at 10.25%. Colombian CPI inflation had decelerated from 18.3% in March 2023 to 4.8% in mid-2025 but printed above 5.0% in the latest three months and is projected at 6.7% at the end of this year and 4.8% in end-2027. These forecasts exceed the 3% target. Yesterday’s action follows a similar full percentage point increase at the prior review in February and “aims to return inflation to a downward trajectory.”

In Indonesia, CPI inflation slowed from a 35-month high in February of 4.8% to 3.5% last month, but a second data release today got all the attention, showing a smaller-than-expected $1.3 billion trade surplus. The Indonesia rupiah briefly moved past 17041/USD in response but currently shows a mere 0.2% net daily downtick to 16,914 per dollar.

The South Korean trade surplus in March of $25.8 billion, in contrast, represents a record high. In the first quarter, the surplus was roughly seven times greater than in the first quarter of 2025.

Unemployment in the euro area during February unexpectedly returned to December’s 6.2% from January’s record low 6.1%.

Among the many manufacturing purchasing manager surveys reported today, sub-50 readings in March, which imply weakening activity, occurred in Australia (49.8), Romania (46.2), Russia (48.3), Turkey (47.9), Poland (48.7), South Africa (49.0), Brazil (49.0) and Spain (48.7). Lower readings in March than in February happened in Australia, Japan, Vietnam, the Philippines, Taiwan, China, Russia, Turkey, Hungary, the U.K., Canada, and Spain.

Euroland’s PMI of 51.6 was revised slightly higher and altogether suggests resilience in the face of disruptions to supply, but survey responses also attest to quick pass-through to selling prices of higher costs related to the Middle Eastern war.

Copyright 2026, Larry Greenberg. All rights reserved.

Tags: Bank of Jamaica, Central Bank of Colombia, Manufacturing PMI surveys, MidEast war news

ShareThis

This entry was posted
on Wednesday, April 1st, 2026 at 9:11 am and is filed under New Overnight Developments Abroad – Daily Update.
You can follow any responses to this entry through the RSS 2.0 feed.