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Yesterday, the US announced it would escort ships through the Strait of Hormuz — calling it a humanitarian operation (!) Iran warned it would retaliate, and reports suggest the US went ahead regardless. Iran then struck ships and key oil infrastructure in Fujairah, UAE — notably a terminal that allows exports bypassing the Strait. Unsurprisingly, oil prices spiked, with US crude nearing $110pb and Brent $115pb. This morning, uncertainty remains high, though prices have eased slightly.

The pattern is familiar: the $115–120pb range is acting as strong resistance — above this level, the market shifts from pricing supply constraints to pricing demand destruction. That brings rising inflation expectations, more hawkish central bank expectations and higher yields — all of which were triggered yesterday.

The US 2-year yield jumped near 4%, while the 30-year yield breached 5%. European 10-year benchmark yields also moved higher.

As a result, the dominant market narrative flipped from AI optimism to Middle East tensions. The US dollar index rebounded past its 200-DMA, while gold eased toward $4’500, pressured by the stronger dollar and rising yields, which increase the opportunity cost of holding non-yielding assets. I believe gold’s muted reaction also reflects the speculative positioning built up ahead of the crisis. That said, gold remains well supported in the current geopolitical backdrop, with central banks reportedly continuing to accumulate on dips.

Elsewhere, the Reserve Bank of Australia (RBA) delivered its third straight rate hike — in line with expectations — to rein in inflation. The AUDUSD nevertheless eased, pressured by a broadly stronger US dollar driven by geopolitical tensions and higher oil prices. The EURUSD is testing its 200-DMA to the downside, while USDJPY is consolidating just below its 100-DMA.

FX moves will likely remain driven by the US dollar in the near term. The higher the tensions, the higher oil prices, and the stronger the dollar. A stronger dollar raises imported inflation globally, reinforcing expectations for tighter monetary policy. That, in turn, weighs on risk appetite.

As such, major US and European indices retreated. The Stoxx 600 was also hit by a notable selloff in European carmakers on reports that Trump would impose a 25% tariff, arguing Europeans are not complying with trade agreements. Europeans deny. The situation remains legally and politically unclear, anyway.

But forget about the tariffs for a second. The broader issue is structural: European carmakers will struggle to replace US demand, as the US continues to restrict Chinese EV penetration. Outside these regions, markets are increasingly open to Chinese EVs, which are cheaper and often more advanced. Meanwhile, higher fuel prices accelerate the global EV transition.

To me, European carmakers will remain under pressure with or without US market access — without it, the unravelling would simply be faster.

On oil, renewed tensions and damage to infrastructure should keep upward pressure in place. A spike above $120pb is possible, but unlikely to be sustained — at those levels, demand destruction typically kicks in and caps further gains.

Voilà, that’s it for the big picture.

The recent spike in oil prices is weighing on European futures this morning, while Nasdaq futures are in positive territory.

After the bell yesterday, Palantir Technologies reported an 85% jump in Q1 sales year-on-year, driven by strong US military demand. Alas, solid results and guidance were not enough — the stock fell in after-hours trading.

Today, AMD heads into earnings with expectations for ~30%+ year-on-year growth, driven by AI and data centre demand. But the bar is high: after a rally of more than 85% since late March, the key question is whether AMD can deliver a convincing beat, particularly against Nvidia’s dominance and ongoing supply constraints.

Nvidia, for its part, is starting to face growing competition — from AMD, as well as custom chips developed by hyperscalers like Amazon and Google.

So far, none have matched Nvidia’s full-stack ecosystem — especially its CUDA software moat — which keeps it firmly in the driver’s seat. But a shift is underway between training and inference. Training large models remains compute-heavy and tightly tied to Nvidia’s ecosystem. Inference, however, is about cost, efficiency and scale — and that’s where competition intensifies, with solutions like Google’s TPUs and Amazon’s Inferentia chips.

Anyway, let’s see how AMD’s earnings resonate — and whether they can help offset the geopolitical noise.

In focus today

Today will be quiet in terms of data releases, with only US data releases on the calendar. In the afternoon, the April ISM Services Index and March JOLTs job openings will be released. Especially, the latter is a key indicator of labour demand for the Fed. It will be interesting to see how March figures compare to February, when JOLTS job openings fell to 6.882m, with the job openings-to-unemployment ratio dropping to 0.9, signalling weaker wage growth ahead.

Economic and market news

What happened overnight

In Australia, the Reserve Bank of Australia (RBA) hiked rates by 25bp, bringing the policy rate to 4.35%. This marks the third increase in 2026, as the RBA responds to sustained inflationary pressures. While higher energy prices driven by Middle East tensions are a key factor, stronger-than-expected domestic demand and capacity constraints are also contributing. Inflation remains elevated, with second-round effects emerging, reinforcing the RBA's commitment to restoring price stability.

Tensions in the US-Iran conflict intensified as Iran launched missile and drone attacks on the UAE, igniting a fire at a petroleum industrial site and prompting the UAE to intercept multiple projectiles. In response, the US reported sinking six Iranian boats in the Strait of Hormuz. Amidst these developments, US forces reportedly cleared paths for two vessels through the strait, with Mærsk confirming its US-flagged Alliance Fairfax transited under military protection. Tehran condemned the move as a violation of the ceasefire. Energy markets remain volatile, with Brent crude prices at 113 USD/bbl, reflecting persistent supply concerns. Mounting tensions are testing the fragile ceasefire, with risks to inflation becoming more pronounced.

What happened yesterday

In the euro area, the ECB's quarterly Survey of Professional Forecasters (SPF) revealed higher inflation expectations, but lower growth projections compared to the previous survey. Inflation is projected at 2.7% y/y for 2026 and 2.1% y/y for 2027, while GDP growth for 2026 has been revised down to 1.0% y/y from 1.2% y/y. With minimal changes to long-term inflation expectations, the report offers limited support for rate hikes and leans slightly dovish. Inflation forecasts may have a downward bias, as the survey was conducted during the two-week ceasefire announcement. Forecasts assumed USD oil prices of 94 in Q2, 85 in Q3, and 80 in Q4, while Brent oil prices fell sharply during the survey period, dropping from 120 USD/bbl on 31 March to 90 USD/bbl by 8 April.

In Denmark, the central bank did not intervene in the FX market in April, even as EUR/DKK reached a new historic high of 7.4735. Its steady approach toward the recent upward trend in EUR/DKK suggests that it may allow the currency pair to rise further if upward pressure resumes. Additionally, the lack of intervention in FX markets indicates that the likelihood of a unilateral rate hike in Denmark this year remains low, in our view.

In Sweden, manufacturing PMI increased to 57.2 in April. Input prices surged to 81.3, its highest level since 2022. Despite this increase, the report revealed declines in new orders and production. Delivery times lengthened, which typically boosts PMI as longer delivery times often signal strong demand. However, it is likely that the current increase in delivery times is primarily due to supply chain disruptions rather than heightened demand.

Equities: Equities were lower yesterday. S&P 500 -0.4% and Stoxx 600 -1% in a volatile session, characterized by Iran headlines. This was a de-risking session in equities, with almost all sectors lower but tech and energy. Defensive stocks outperformed, including health care and tech while industrials, materials and consumer discretionary sold off ~-1%. It is interesting to see tech outperforming even in a defensive session like yesterday, especially as yield were materially higher. This mix would easily have made the tech the worst performing sector three months ago. Instead, software stocks even bounced 2% yesterday, outperforming the market by a meaningful 3pp. This says something about the strength of the latest tech stock rotation. As our readers will know, we see it continuing.

FI and FX: Escalation between the US and Iran sent bond yields higher and USD stronger. Global bond yields rose again as tensions remain high in the Middle East after an escalation of the conflict in the Strait of Hormuz sent oil prices higher. 30Y Treasuries are now trading above 5% and the short-term risk is that yields will grind higher unless some form of deal is reached between Iran and the US. The dollar grinded lower versus the euro, while JPY remains stable given the possibility for currency intervention.

Daily Pivots: (S1) 1.1664; (P) 1.1707; (R1) 1.1732; More….

Intraday bias in EUR/USD remains neutral and outlook is unchanged. Rise from 1.1408 is expected to continue as long as 1.1642 support holds. Firm break of 1.1848 will target 1.2081 high next. However, firm break of 1.1662 support will indicate the the rebound from 1.1408 has completed, and bring deeper decline back towards this low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1537). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Daily Pivots: (S1) 156.22; (P) 156.76; (R1) 157.79; More...

USD/JPY is staying in consolidations above 155.48 and intraday bias remains neutral. Risk will stay on the downside as long as 55 4H EMA (now at 158.29) holds. Below 155.48 will extend the fall from 160.71 and target 152.25 cluster support (38.2% retracement of 139.87 to 160.71 at 152.74).

In the bigger picture, for now, corrective pattern from 161.94 (2024 high) is still seen as completed at 139.87. Rise from there is seen as resuming the long term up trend. So, break of 161.94 is expected at a later stage to resume the long term up trend. However, sustained break of 55 W EMA (now at 154.03) will dampen this view and bring deeper fall back towards 139.87 to extend the pattern from 161.94.

Daily Pivots: (S1) 1.3542; (P) 1.3601; (R1) 1.3634; More...

Intraday bias in GBP/USD remains neutral and further rise is still expected as long as 1.3453 holds. Above 1.3657 will target 61.8% projection of 1.3158 to 1.3598 from 1.3453 at 1.3725 first. Firm break there will target a retest on 1.3867 high. However, break of 1.3453 will turn bias back to the downside for 1.3158 support instead.

In the bigger picture, current development suggests that price actions from 1.3867 are merely a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is in favor for a later stage, towards 1.4248 key resistance (2021 high).

Daily Pivots: (S1) 0.7808; (P) 0.7829; (R1) 0.7861; More….

Intraday bias in USD/CHF remains neutral and more consolidations could be seen above 0.7778. Risk will remain on the downside as long as 0.7923 resistance holds. Firm break of 61.8% projection of 0.8041 to 0.7774 from 0.7923 at 0.7758 will extend the fall from 0.8041 to 100% projection at 0.7656. However, firm break of 0.7923 will turn bias back to the upside for stronger rebound.

In the bigger picture, rebound from 0.7603 medium term bottom is seen as correcting the fall from 0.9200 only. Rejection by 55 W EMA (now at 0.8042) will affirm this bearish case, and setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage. Though, sustained break of 55 W EMA will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 1.3594; (P) 1.3611; (R1) 1.3643; More...

Intraday bias in USD/CAD is turned neutral with current recovery, and some consolidations would be seen above 1.3549. Further decline is expected as long as 1.3709 resistance holds. Below 1.3549 will resume the fall from 1.3965 to retest 1.3480 low. Decisive break there will resume whole down trend from 1.4791. However, firm break of 1.3709 will turn bias back to the upside for stronger rebound.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen, as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. However, decisive break of 38.2% retracement of 1.4791 to 1.3480 at 1.3981 will argue that the correction has completed with three waves down to 1.3480 already.

Daily Pivots: (S1) 0.7180; (P) 0.7204; (R1) 0.7225; More...

Intraday bias in AUD/USD is turned neutral first with current extended retreat. Further rise will remain in favor as long as 0.7101 support holds. On the upside, break of 0.7227 will resume recent up trend to 61.8% projection of 0.6420 to 0.7187 from 0.6832 at 0.7306. However, decisive break of 0.7101 support will confirm short term topping, and bring deeper pullback to 55 D EMA (now at 0.7052) and below.

In the bigger picture, rise from 0.5913 (2024 low) is still in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). Further rally should then be seen to retest 0.8006. For now, outlook will remain bullish as long as 0.6832 support holds, in case of pullback.

Dollar is rising as risk aversion creeps back into global markets as the US–Iran ceasefire comes under increasing strain. Developments over the past 48 hours suggest the fragile truce is under mounting pressure, raising the risk of renewed escalation. However, price action indicates investors are bracing for further conflict rather than pricing a full-blown crisis—for now.

The most notable shift is the expansion of the conflict beyond a bilateral US-Iran confrontation. For the first time since the April ceasefire, Iran launched missile and drone strikes against the United Arab Emirates, specifically targeting the Fujairah Petroleum Zone. This marks a clear regionalization of the conflict and introduces a new layer of risk to global energy infrastructure.

At the same time, tensions at sea continue to intensify. The US military confirmed it had sunk seven small Iranian vessels that attempted to interfere with oil tankers being escorted under the “Project Freedom” initiative. The operation, aimed at securing shipping lanes in the Strait of Hormuz, has become a focal point of confrontation, with both sides increasingly willing to engage directly.

Meanwhile, diplomacy is going nowhere. Talks in Islamabad, mediated by Pakistan, have stalled over irreconcilable demands. The US is insisting on “zero enrichment” and the removal of all nuclear material, while Iran is demanding immediate and permanent sanctions relief. The lack of progress suggests that a negotiated de-escalation remains unlikely in the near term.

This combination of military escalation and diplomatic deadlock has created what can be described as a “gray zone” conflict. Both sides are engaging in active hostilities, yet neither has formally declared the ceasefire over. However, unless negotiations produce a breakthrough soon, the transition from a fragile truce to an openly active conflict appears increasingly probable.

Markets are beginning to reflect this shift, albeit in a measured way. Dollar has rebounded broadly and is currently the strongest performer for the week, benefiting from renewed safe-haven demand. Yen is also firm, while commodity-linked currencies such as the Australian and New Zealand Dollars are under pressure.

Despite this shift, price action remains contained. Major currency pairs and crosses are still trading within last week’s ranges, indicating that while investors are hedging against escalation risk, they are not yet positioning for a full crisis scenario. The absence of breakouts suggests that conviction remains limited. Oil markets are sending a similar signal. Brent crude has moved higher in response to the rising tensions but remains well below the critical $120 crisis threshold.

Overall, markets appear to be in a preparatory phase. Investors are adjusting positions to account for rising geopolitical risks, but without the urgency that would accompany a clear escalation into full-scale conflict. This is reflected in steady but controlled moves across asset classes.

In this environment, the key question is not whether risks are rising—they clearly are—but whether they will cross the threshold into a scenario that forces a more aggressive repricing. For now, markets are bracing for escalation, but the lack of panic suggests that investors are still waiting for confirmation before making more decisive moves.

In Asia, at the time of writing, Japan is on holiday, Hong Kong HSI is down -1.29%. China is on holiday. Singapore Strait Times is down -0.58%. Overnight, DOW fell -1.13%. S&P 500 fell -0.41%. NASDAQ fell -0.19%. 10-year yield jumped 0.07 to 4.45.

RBA Hikes to 4.35%, Signals It’s Not Done Yet

RBA raise interest rate as expected, and signaled a clear shift to higher-for-longer policy. Inflation is now expected to peak higher and fall more slowly, while growth forecasts are being downgraded. With rates projected near 4.7% through 2028, the central bank is preparing for a prolonged fight against persistent price pressures. Read more.

Gold Slides on Hormuz Attacks, 4,400 Breakdown in Focus, 4,000 Next

Gold is under renewed pressure as Hormuz tensions escalate and oil prices surge. Iran’s attacks on ships and a UAE oil port have intensified supply fears, lifting the Dollar and shifting focus back to inflation risks. With 4,400 support now under threat, a breakdown could accelerate the slide toward the 4,000 level. Read More.

Fed’s Williams Downplays Split, Says Policy Agreement Remains Strong

Fed’s Williams is pushing back on fears of a divided central bank. Despite recent dissent, he says policymakers largely agree on the current stance, with rates well positioned amid rising uncertainty. With no urgency to hike and limited guidance ahead, the Fed remains firmly in wait-and-see mode. Read More.

IMF’s Georgieva Warns Adverse Scenario Already Unfolding as War Persists

The IMF is signaling a major shift in the global outlook. Georgieva says the baseline scenario is no longer valid, with the economy already moving into a worse path as war-driven oil prices fuel inflation. If the conflict continues, risks of even slower growth and unanchored inflation expectations could rise sharply. Read More.

AUD/USD Daily Report

Daily Pivots: (S1) 0.7180; (P) 0.7204; (R1) 0.7225; More...

Intraday bias in AUD/USD is turned neutral first with current extended retreat. Further rise will remain in favor as long as 0.7101 support holds. On the upside, break of 0.7227 will resume recent up trend to 61.8% projection of 0.6420 to 0.7187 from 0.6832 at 0.7306. However, decisive break of 0.7101 support will confirm short term topping, and bring deeper pullback to 55 D EMA (now at 0.7052) and below.

In the bigger picture, rise from 0.5913 (2024 low) is still in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). Further rally should then be seen to retest 0.8006. For now, outlook will remain bullish as long as 0.6832 support holds, in case of pullback.

The RBA has made one thing clear: it is not done yet. By lifting the cash rate to 4.35%, with the decision backed by an 8–1 majority, and signaling a path toward 4.7% by the end of 2026, the central bank is shifting decisively into a higher-for-longer stance as inflation proves more persistent than expected.

The problem is not just that inflation is high—it is that it is becoming entrenched. The RBA acknowledged that price pressures picked up sharply in the second half of 2025 and are now being reinforced by the global energy shock triggered by the Middle East conflict. Fuel and commodity prices are rising, firms are beginning to pass on costs, and short-term inflation expectations are moving higher.

The updated projections confirm that the situation has deteriorated. Headline inflation is now expected to peak at 4.8% in mid-2026, significantly higher than previously forecast (4.2%), while core inflation remains sticky at 3.5% even by the end of the year. The return to target is delayed, with inflation only easing back toward acceptable levels in mid-2027.

But tightening comes at a cost. Growth forecasts have been cut, with GDP now seen at 1.9% in 2026 and slowing further to 1.3% in 2027. The RBA is effectively acknowledging that restraining inflation will require weaker economic momentum.

The real signal lies in the rate path. A projected cash rate of 4.7% suggests more hikes ahead, and importantly, a prolonged period at restrictive levels through 2028. This is not a quick tightening cycle—it is a sustained effort to bring inflation back under control.

At the same time, risks are rising on both sides. A prolonged conflict in the Middle could push energy prices even higher, driving inflation further up while simultaneously dragging on growth.

In short, the RBA is confronting a more difficult reality: inflation is higher, growth is weaker, and the policy response will need to be stronger and longer-lasting. The shift to a higher terminal rate and extended hold confirms that the fight against inflation is far from over.

Full RBA statement here.