Financial markets moved into a relief phase after the US-Iran ceasefire. Brent crude fell by roughly 16%, while global equities and bonds rose, and the US Dollar dropped broadly.
Pro-cyclical currencies outperformed as risk sentiment improved and the Dollar weakened. If ceasefire talks remain intact, the Dollar may fall further towards levels suggested by US-G6 rate differentials.
Focus On Fed Minutes
Attention is now on the Federal Reserve’s March 17–18 meeting minutes. They are due at 7:00pm London time (2:00pm New York) and may clarify the threshold for a future rate rise.
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Financial markets are leaning hard into relief mode following the US-Iran ceasefire. We have seen the Dollar Index (DXY) fall below 101.5 for the first time this quarter, a drop of over 2.5% in just a week. Pro-cyclical currencies like the Australian and Canadian dollars are outperforming as risk sentiment improves.
Given that the dollar has room to adjust lower, we should consider strategies that profit from this potential move. Buying put options on dollar-tracking ETFs or call options on the Euro could provide a way to capitalize on further weakness. This approach allows us to participate if the ceasefire holds while managing our downside risk.
Oil Volatility And Strategy
We are also seeing the ceasefire’s impact on energy markets, with Brent crude prices slumping significantly. Implied volatility in oil options has collapsed, with the CBOE Crude Oil Volatility Index (OVX) dropping nearly 20 points to its lowest level since late last year. This suggests an opportunity for selling premium, provided the geopolitical situation remains stable.
This market reaction is reminiscent of what we observed during periods of de-escalation in 2025. Looking back, brief but profitable windows emerged to short the dollar against commodity currencies when geopolitical tensions eased. We saw a similar dynamic after the initial energy shocks of 2022, where risk-on sentiment temporarily weighed on the greenback.
The upcoming minutes from the March FOMC meeting will be the next major catalyst. We must be cautious, as recent inflation data showed core CPI remaining stubborn at 3.1%, suggesting the Fed may not be in a rush to alter policy. Any surprisingly hawkish tone from the minutes could quickly reverse the dollar’s recent slide.
