Electrifying Market Reversals after 2-Week Ceasefire Deal Averts Destruction of Iranian Infrastructure – Currency Thoughts
Electrifying Market Reversals after 2-Week Ceasefire Deal Averts Destruction of Iranian Infrastructure
April 8, 2026
Although the evolution of the Middle East war beyond April 22 remains very uncertain, world financial markets sharply reversed prior trends, choosing to disregard the remaining hurdles that must be overcome to secure peace beyond the two-week ceasefire as well as immense supply disruptions that will be difficult to untangle. The extent of the major piece of the ceasefire — reestablishing free and normal shipping traffic through the Strait of Hormuz for the next two weeks — remains to be seen.
For now, however, the rug has been pulled out from the dollar’s safe haven appeal, and the U.S. currency has posted overnight losses of 16-1.8% against the Mexican peso, South Korean won and New Zealand dollar and 0.9-1.3% relative to the Australian dollar, Japanese yen, euro and sterling. Smaller declines have occurred of 0.2% relative to the Canadian dollar, 0.3% vis-a-vis the Turkish lira, and 0.4% against the Indonesian rupiah.
The cost of West Texas Intermediate oil tumbled 17.6% on balance overnight but, at $93.10 per barrel, remains 60.7% above its end-2025 level. Whereas the prices of silver and gold have recovered 7.6% and 3.1%, Bitcoin has dipped just 0.3%.
Ten-year sovereign debt yields plunged 30 basis points today in Italy, followed by drops of 27 basis points in Greece and Spain, 24 basis points in France, 21 basis points in the U.K., 16 bps in Germany, 13 bps in Australia, but just six bps in the United States and four bps in Japan.
Stock markets recorded outsized gains of 6.9% in South Korea, 5.4% in Japan, 4.6% in Taiwan, 4.0% in Indonesia and India, 3.1% in Hong Kong, 2.7% in China, 2.6% in Australia, and 1.4% in New Zealand. Among the four major U.S. equity indices in futures trading a half hour before the opening bell, the DOW and SPX are 2.6% higher, while the Nasdaq and Russell 2000 sport gains of 3.6%. The British Ftse has reclaimed 3.0%, while stock market gains so far today in Euroland’s four largest economies range from 4.3% in Italy to 5.2% in Germany.
Central bank officials in India and New Zealand left their key interest rates unchanged as expected at 5.25% and 2.25% after their latest monetary policy reviews. Although at an 11-month high, Indian CPI inflation remains below the 4% target but may temporarily move above it during the coming fiscal year. India’s policy interest rate crested at 6.5% during the 12 months ending in February 2025 and was most recently cut by 25 bps to 5.25% in December. The unanimous decision at the Reserve Bank of India released a statement that addresses the uncertain Middle Eastern war:
The intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks. However, the fundamentals of the Indian economy are on a stronger footing, providing it with greater resilience to withstand shocks now than in the past. The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.
The Reserve Bank of New Zealand‘s Official Cash rate has been reduced by a total 325 basis points since August 2024 but not since November. New Zealand CPI inflation ended 2025 at 3.1%, marginally above the 1-3% target range. A statement of explanation behind today’s decision to maintain a 2.25% policy interest rate draws a distinction between the current external economic shock and earlier ones this decade:
The current economic situation is different to 2022 when COVID-19 and Russia’s invasion of Ukraine disrupted global supply chains and increased energy prices. Back then, demand was growing strongly, adding to inflation pressure. The Committee’s decision to hold the OCR balances the potential benefits of responding pre-emptively to the risk of higher medium-term inflation against the cost of unnecessarily stifling the economic recovery.
Data reported today, although plentiful, were overshadowed by relief that a temporary deal to prevent a big escalation of the Middle Eastern war had been reached at the 11th hour of negotiations. There were several data highlights to bear in mind, nonetheless.
Producer price inflation in the euro area during February sank 0.7% on month and 3.0% on year, their largest 12-month drop in 16 months. February’s volume of retail sales in the joint currency bloc dipped 0.2% on month and posted their smallest year-on-year increase (1.7%) since September.
Other price reports this Wednesday included a 2-month high 1.8% rate of consumer price inflation in Hungary last month and where a general election is being held this coming Sunday; a 2-month low CPI inflation rate in Taiwan during March; and a 2-month high CPI inflation rate in Mongolia of 7.4%.
Three statistics were released in Japan:
- February’s current account surplus of JPY 3.733 trillion exceeded expectations and represents a 5-month high.
- The economy watchers index, a gauge of perceptions among service sector workers, tumbled 6.7 index points to a 49-month low in March, and the companion data series measuring expectations fell to its weakest level since December 2020.
- On-year wage growth as measured by labor cash earnings improved to 3.3% nominally and 1.9% adjusted for inflation.
German industrial orders, which had plunged 11.1% in January, rebounded by a smaller-than-expected 0.9% in February but were still 3.5% above the year-earlier level. A decent rebound in exports was neutralized but a further slide in domestic demand.
The French current account swung from a EUR 2.92 billion deficit in the first two months of 2025 to a surplus of EUR 0.54 billion a year later. The two-month trade deficit was nearly halved.
South Korea recorded a record monthly current account surplus in February of $23.2 billion.
Britain’s housing market remains depressed. The Halifax house price index dropped 0.5% in March, reducing its year-on-year rise to a mere 0.8%. The U.K. construction purchasing managers index printed at a sub-50 reading for a fifteenth straight month in March with a score of 45.6.
Construction PMI readings for Euroland last month also convey weakness. In the whole joint currency bloc, the PMI score of 44.6 represents a 5-month low, and the French and Italian readings of 38.4 and 48.8 were their lowest in 18 and 19 months, respectively. Germany’s construction purchasing managers index rebounded 4.3 points to a 3-month high but, at 48.0, was below the 50 level separating expansion from deterioration for a third straight time.
Hong Kong’s manufacturing purchasing managers index worsened four index points to a 9-month low of 49.3.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: European construction PMIs in March, German industrial orders, Reserve Bank of India, Reserve Bank of New Zealand
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