The US Dollar Index held near 99.80, close to last week’s peak at 100, as markets tracked the Iran conflict and a US deadline set for 8:00pm EST linked to the Strait of Hormuz. Tehran rejected a temporary ceasefire and cut communication with the US, while oil markets priced disruption risk.
US February core capital goods orders rose 0.6%, while headline durable goods orders fell 1.4%. Attention now turns to the FOMC minutes and PCE inflation data.
EUR/USD rose towards 1.1580 as the euro stayed supported by expectations of possible ECB tightening if oil-driven inflation persists. GBP/USD moved up towards 1.3270, while the pound remained near a more than four-month low against the dollar.
USD/JPY traded around 159.80, near levels previously linked to Japanese intervention. Japan’s 10-year JGB yield reached a 27-year high of 2.43%.
AUD/USD traded near 0.6960 against a backdrop of recent RBA hawkishness. WTI crude reached about $117 per barrel before easing to $113.40, with some physical grades near $150 and about 12 million barrels per day effectively disrupted.
Gold traded near $4,680, supported by uncertainty and China’s central bank extending gold buying to 17 months. The week’s diary includes EU Retail Sales, an ECB non-monetary policy meeting, NZ and US releases, and US CPI on Friday.
We are looking back at this time last year, in April 2025, when the conflict in the Strait of Hormuz sent oil prices soaring. WTI crude was pushing past $117 per barrel then, creating extreme volatility that we must now contrast with today’s more stable price of around $78. That crisis provided a stress test for markets, and the aftershocks are still setting up today’s trading opportunities.
The US Dollar Index was near 100 back then, fueled by safe-haven demand and expectations of a hawkish Federal Reserve. Now, with the latest March 2026 core PCE inflation data cooling to 2.1%, the narrative has completely shifted toward potential rate cuts later this year. Traders should consider using options on SOFR futures to position for a dovish pivot from the Fed, a stark reversal from the hawkish stance it held during the 2025 energy shock.
In Europe, the ECB was signaling rate hikes in early 2025 to combat the oil-driven inflation spike, which kept EUR/USD surprisingly resilient. That hawkishness faded as the global economy slowed in late 2025, and now the focus is on policy divergence with the US. We see opportunities in long EUR/USD call spreads to capitalize on the potential for the Fed to cut interest rates before the ECB does.
A year ago, USD/JPY was threatening to break 160, a level that put Japanese officials on high alert for currency intervention. After authorities did step in during the summer of 2025, the pair has settled into a more controlled range around 148. This suggests that selling volatility through strategies like short strangles could be profitable, as officials seem determined to prevent the explosive moves we witnessed last year.
The Australian Dollar was surging around this time in 2025, supported by a hawkish RBA, but this strength was short-lived as the commodity shock hit global demand. Today, with China’s latest manufacturing PMI showing modest expansion at 50.4, the Aussie’s fate is again tied to global growth prospects rather than last year’s chaotic energy prices. We believe playing the AUD against currencies with more domestic troubles, like the pound, offers a clearer path.
Gold was trading near a lofty $4,680 last April, supported by geopolitics but capped by the strong dollar. With tensions eased and the dollar having softened, gold has settled near $3,950, reflecting a calmer market environment. However, since central banks are still hesitant to cut rates too quickly, using gold call options remains a cost-effective hedge against any unexpected return of inflation.
