USD, JPY, EUR flows: Focus on US/Iran deal
Markets await Iran's response to teh US proposal to end hostilities. Market risks may be skewed towards a risk negative response after the moves of the last few days priced in a positive outcome
A fairly quiet overnight session saw the USD dip a little early in Asia but recovery by the end of the session. The focus is on Iran’s response to the US proposal for a peace deal. The deal is very limited in scope, serving as a basis for further negotiations over the key US demands of an end to Iran’s nuclear ambitions and an opening of the Straits of Hormuz, so there is every chance that Iran agrees. However, the good news is already largely priced in after the drop in the oil price and gains in equities in the last few days. There is likely to be much more negative reaction if an end to hostilities is not agreed than there will be a positive reaction if Iran rejects the proposals, so the USD should be well supported against the riskier currencies, while the reiteration of Japan’s determination to prevent JPY weakness overnight underlines upside risks for the JPY on the crosses.
Otherwise we have a Norges Bank monetary policy meeting meeting and ECB speakers today. See the Daily FX Strategy for a preview.