• Iranian negotiating delegation suspends Switzerland trip
• President Trump expects ‘complete ceasefire on all fronts’
• USD hits one-year high on Fed rate hike bets, Japan warns on yen
• Nasdaq, S&P 500 rebound strongly on signing of US-Iran deal

Forex

USD popped up to a 13-month high at 100.80 and above the March 2026 top at 100.64. Markets have been absorbing the hawkish Fed and repricing the rate outlook. Swaps imply a little more than one and a half 25bps of tightening by year-end, with the September contract close to pricing in a full quarter point hike. See more below around the dollar and the new Fed. Crude oil fell further but pared losses, with Brent falling trading around its 200-day SMA.

EUR dipped to a fresh cycle low at 1.1453, a level last seen in late March, as the post-Fed drop continued. The outlook for relative central bank policy has shifted in the aftermath of Wednesday’s hawkish FOMC, delivering a fundamental headwind for the euro, with a renewed decline in interest rate differentials. There’s around 35bps of ECB hikes priced by year-end with a near 90% chance of the move by September.

GBP was the major laggard as the BoE held rates at 3.75% as expected in a 7-2 vote split. There was a mild tightening bias but that depends on how the upside risks to energy and inflation evolve. Obviously, this contrasts with the hawkish Fed as yield spreads extend their slide to new one-year lows. This year’s low from late March sits at 1.3159. Domestic risk is elevated as markets look to the result of the Manchester/Andy Burhnam by-election, setting the stage for a Labour Party leadership transition and a departure for PM Starmer.

JPY underperformed as the major pushed higher above the prior cycle top at 160.72 from late April when we saw intervention. Renewed widening in US-Japan rates and yield spreads is lifting USD/JPY. There’s little meaningful resistance above the 160 level until major resistance closer to 162. Today’s Japan CPI expectations are relatively muted with headline seen holding steady in the mid-1% area and core expectations to remain just below 2%.

Stocks

US stocks: The S&P 500 lost 1.21% to close at 7,420, the Nasdaq closed down 0.99% at 29,671 and the Dow Jones settled lower by 0.97% at 51,498. The tech-laden Nasdaq 100 outperformed amid broad-based strength in semiconductors and memory names due to two bullish stories. President Trump said Apple has agreed to work with Intel to design and build its chips in America. Secondly, Apple CEO Cook said it plans to raise prices due to the memory chip crunch. Apple rose 0.7%, Intel jumped 10.6% while semi stocks broadly surged with Micron adding 8.7%, Marvell up 7.3% and the SOX index 6.4% to more record highs. It meant Technology was the clear outperforming sector, followed by Consumer Discretionary and Communication Services. But sectors were mixed overall, with Energy and Health the laggards. Energy saw 1.7% losses despite crude prices settling flattish. It was also quad witching today, which likely accounts for some of the choppy trade, ahead of the US market holiday on Friday. 

Asian Stocks: Futures are mixed. APAC stocks traded mixed after the hawkish Fed and emphasis on price stability and inflation over the labour market. The ASX 200 saw declines led by tech and miners. The Nikkei 225 printed another record high above 71,000 as lower oil prices boosted manufacturers. The Hang Seng and Shanghai Comp were lower given that any rate hike in the US would force the HKMA to move in lockstep with the Fed to defend the USD/HKD peg.

Gold

Gold fell for a second straight day as higher rates make the non-yielding asset less attractive. The 200-day SMA sits at $4,436 while the recent low is $4,023.

Chart of the Day – USD hits fresh highs

It’s all about the new era of the Fed and its slightly surprising hawkishness. Key to this was the dot plot shift from rate cut in the March projections to one hike, while a range of changes to communication, data and the bank’s inflation framework are in play as new Chair Warsh stamps his print on the Committee. ‘Trade the data, not the Fed’ could be the new moniker with Warsh unimpressed with forward guidance, dot plots and any previous Fed forecasts. So much so, that he declined to give one. This has all seen the greenback move higher and print multi-month highs. The next obvious level is the spike high from May 2025 at 101.97. The 100-week SSMA sits at 101.03. A support zone resides around 100.17/100/39.