Tenser Middle East Situation Belies Trump’s Belief that a Deal Maybe Near – Currency Thoughts
Tenser Middle East Situation Belies Trump’s Belief that a Deal Maybe Near
April 20, 2026
Weekends have been full of surprises in the Middle East war, and this past one was no exception. Late last week had experienced a large drop in oil prices and renewed interest in riskier assets. Israel had stopped bombing southern Lebanon, paving the way for resumed peace talks between Iran and the United States in Islamabad, and expectations were high that the United States at minimum would again push back its end-date for the present ceasefire, which otherwise will expire at the end of Tuesday. Over the weekend instead, the U.S. fired at and then seized an Iranian cargo ship attempting to pass through the Strait of Hormuz. America’s negotiators are already on the way to Pakistan, but Iranian officials have pulled out of the talks and are promising retaliation for the latest U.S. hostilities.
Stock markets in the Pacific Rim had closed up 0.8% in China and New Zealand, +0.6% in Japan, 0.5% in Indonesia and 0.4% in Taiwan and South Korea. Alternatively, ones in Germany, France, Italy and Spain are down between 1.0% and 1.4%, and U.S. futures shows a loss between 0.5% and 1%. Ten-year sovereign debt yields kicked off this eighth week of the war with jumps of five basis points in the U.K. and Italy, four bps in France and Spain and three basis points in Spain, two bps in Germany and France but just a basis point in the United States and Switzerland. Japan’s 10-year JGB yield dipped a basis point.
The price of West Texas Intermediate crude oil has advanced 5.4% above Friday’s closing level but remains roughly a dime or 10% below where it was a week ago. Precious metal prices like those of gold (-0.8% overnight) and silver (-2.2%) are lower, while Bitcoin, which tends to move inversely with gold, is 1.9% firmer. In the midst of this maelstrom, the dollar remains an oasis of stability although in some cases seemingly because of intervention. The yen failed to penetrate the 160 per dollar threshold, trading instead between 158.7 and 159.2. Indonesia’s rupiah got close to its record low of 17210 but stalled at 17,176 and currently shows nil net movement from Friday. At 0.7807 per dollar, the Swiss franc is currently at its overnight high and 0.1% lower than the pre-weekend close.
This has been another light-data Monday, and the only central bank news of note has been the as-expected retention of the People’s Bank of China loan prime facility rates at 3.0% on the one-year and 3.5% for the five-year rate. Their last movement and only change during 2025 occurred eleven months ago and involved a mere 10-basis point cut in each case. In 2024 there had been a pair of cuts totaling 35 basis points made in July and October.
March producer prices in Germany were strongly influenced by the Middle Eastern war. Energy prices shot 7.5% above February’s level, slashing their 12-month rate of reduction from 12.5% to 3.2%. Other components of the producer price index recorded year-on-year growth of 1.3%, up from 1.2% in the prior month. The all-items PPI, however, imploded from a 3.3% 12-month rate of decline in February to just -0.2% in March.
Producer price inflation in March printed at 0.7% in Estonia, -1.1% in the Czech Republic, and 6.5% in Georgia. Portuguese PPI inflation climbed to 0.0% last month from -3.5% in February, ending a 14-month streak of deflationary readings.
The British Rightmove index of house price inflation weakened to a year-on-year minus 0.9% reading, its weakest observation in 28 months.
Construction output in the euro area slid in February by 0.2% on month and 1.9% on year. Construction in the first two months of 2025 was 1.6% below the average in the final quarter of 2025 and down 3.0% on an average year-on-year basis basis.
Japan’s tertiary index of service sector activity faltered 0.4% in February and posted a 1.9% rise compared to a year earlier following gains of 2.2% in January and 2.0% for all of 2025.
New Zealand’s trade deficit of NZD 297 million last quarter was almost a billion New Zealand dollars above the year earlier surplus of NZD 685 million. Malaysia’s trade surplus of MYR 63.2 billion in the first quarter of 2026 was 54% wider than a year earlier.
Just In: Consumer price inflation in Canada of 2.4% last month was up from 1.8% in February and was as high as any reading in the past 13 months. 2.4% was also registered last December and September. The report in March was dominated by a record 21.9% monthly leap in the price of gasoline, which also exceeded its year earlier level by 5.9%. Canadian CPI inflation excluding food and energy was only 1.9% last month.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Canadian CPI, Chinese loan prime rates, German PPI
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