Suspense as Trump’s Deadline Draws Nearer – Currency Thoughts
Suspense as Trump’s Deadline Draws Nearer
April 7, 2026
The deadline for Iran to meet all of Trump’s demands is now just twelve hours away. Four hours of unprecedentedly massive destruction to the country’s power and bridge infrastructure will ensue. ….Or the U.S. president might move the goal posts and reset the clock, as he’s done before.
In the meantime as this state of extreme suspense plays out, markets are mostly waiting and not really sure who actually wins if the promised escalation in fact ensues. It will depend on whether shipping traffic subsequently resumes through the the Strait of Hormuz, what happens to the price of oil on world markets, who controls Iran politically afterward, whether the broader Middle East becomes more or less stable in the ensuing weeks and months, and whether branded for numerous war criminal offenses, America emerges as a pariah in the minds of the rest of the world. The ambiguity of the moment is captured in this week’s cover of The Economist, showing a smiling Chinese President Xi with the caption advising “Never Interrupt Your Enemy When He’s Making a Mistake.”
The dollar is marginally softer thus far today, slipping 0.2% against the euro and Australian dollar and by 0.1% versus the peso and sterling. A more significant decline of 0.7% occurred against the Korean won, whereas upticks are seen of 0.2% against Indonesian rupiah and Swiss franc and of 0.1% relative to the Japanese yen. In each of these three examples of a fractional firming, intervention support, both real and imagined, played a role. An intra-day record low in the rupiah triggered dollar sales by Bank Indonesia. The yen continues to hover very close to 160 per dollar, a red line that Japanese officials do not want to be crossed, and the Swiss National Bank has frequently warned of intervention when the franc looks unjustifiably strong.
A current 0.3-0.5% drop in all four major U.S. equity index futures also attests to uneasiness over how the U.S. economy will emerge from its war with Iran. In other stock markets around the world, share prices closed up 2.0% in Taiwan, 1.7% in Australia 0.8% in South Korea, 0.7% in India but unchanged in Japan. Stock exchanges in Europe are narrowly down in Germany and the U.K. and narrowly up in France, Spain and Italy.
Bond markets are bracing for higher inflation ahead. Ten-year sovereign debt yields overnight rose by six basis points in Italy, five bps in Spain and France, four bps in Germany and the U.K. and three bps in Switzerland. The U.S. Treasury yield is just one basis point firmer, and the Japanese JGB yield is unchanged, by contrast.
The price of oil has emerged as the most reliable bet on whether markets expect Trump’s inferno threat will come to pass, and the 2.2% overnight spike to about $115 per dollar currently doesn’t bode well. Bitcoin’s price has lost some ground.
Even before hostilities in the Middle East erupted last month, U.S. durable goods orders fell 1.4% in February, their third monthly drop in a row and three times greater than analysts had been expecting.
Foreign exchange reserves during March fell sharply in both Japan (-$36.0 billion to $1.375 trillion) and China (-85.7 billion to $3.342 trillion).
Other Japanese data releases today involved a slight further rise in that economy’s index of leading economic indicators to a 42-month high in February, a larger decline in the index of coincident economic indicators to a 2-month low, and the first monthly rise of household spending in three months during February that left such 1.7% lower than a year earlier.
The Sentix gauge of investor sentiment toward the euro economy tumbled 15.6 points to a one-year low of -19.2 in April from -3.6 in March and +4.2 in February.
Among inflation figures reported today, Austrian wholesale prices jumped 3.9% in March, lifting their 12-month rate of increase to a 37-month high of 5.4%. Czech consumer price inflation in March rose a half percentage point above February’s 114-month low of 1.4%. Estonian CPI inflation also accelerated a half percentage point to 3.6% in March. In Sweden and Thailand, however, consumer price inflation remained tame in March, with respective readings of -0.1% and +0.6%. Swedish underlying core inflation was 1.6%. CPI inflation in the Philippines before the start of the Middle Eastern war leaped to a 19-month high of 4.1% in February from 2.4% in January and just 0.9% last July.
A theme common to composite and service sector purchasing manager surveys from March and reported this Tuesday depicted big jumps in input price pressures related to elevated energy costs and supply chain disruptions caused by the Middle East war.
Euroland’s revised composite PMI index reading of 50.7, a 9-month low, depicts near stagnation with weakened demand and output and deteriorating confidence in the future outlook. The hit taken in March dashes hopes lifted by encouraging signs in the first two months of 2026 and raises the possibility of negative growth in the second quarter and the need for the European Central Bank later this year to raise interest rates in order to counter second-order inflation. Euroland’s service sector PMI of 50.2 was a 10-month low.
Within the euro area, the service sector purchasing manager indices in March of Germany (50.9), France (48.8), Italy (48.8) and Spain (53.3) were respectively at a 7-month low, a 2-month low, a 29-month low, and a 2-month high. Ireland’s composite and service PMI scores fell to 6- and 7-month lows of 52.1 and 50.7, respectively.
The Middle Eastern war has also hurt the U.K. economy, which had been slowing even before its onset. The British composite and service sector purchasing manager indices in March were both revised downward to a 6-month low of 50.3 and an 11-month low of 50.5.
For Lebanon, which is experiencing a spin-off of the initial conflict, the private sector PMI slumped from 51.2 in February to a 17-month low of 47.4 in March, returning conditions to those during the last time Israel bombed Hezbollah strongholds.
In Australia, the composite PMI score has been revised half a point lower to a 28-month low of 46.5. The reading for the service sector of 46.3 was also at a 28-month low.
5,216 miles separate Cape Town, South Africa from Tehran, yet even that is not enough to immunize the economy. Although at a 10-month high, the 50.8 South African private purchasing managers score in March was still just slightly above the 50 line the separates improving from worsening conditions, and the sub-index highlighting future business expectations slumped to its lowest reading since July 2021.
After a scheduled monetary policy review, the National Bank of Romania today left its key interest rate unchanged at 6.5%, which has been the level for the past 19 months and close to the cyclical peak of 7.0% maintained from January 2023 until the first of two 25-basis point cuts in July 2024. Romanian consumer price inflation still exceeds 9.0% versus a central bank target range of 1.5-3.5%. Now that global prices for energy and other key commodities are sharply higher than back in February, Romania faces higher inflation in the short run and a murky prognosis concerning how long input prices will stay very elevated.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: composite and service PMI surveys, National Bank of Romania, U.S. durable goods orders
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