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Oil isn’t impressed by the Axios report of this morning. The news outlet wrote that Iran offered a new proposal to the US which states that it is ready to reopen the Hormuz Strait, provided that the US ends its blockade too. Nuclear talks would come later. The US administration has yet to respond to the fresh proposal but markets don’t seem to expect anything positive to come out from it. Brent rose to as high as $108/barrel before easing somewhat again to $107.3 currently. It’s enough for core bond yields to add 1 to 3 bps, be it in technically irrelevant trading. The avalanche of central bank meetings due this week creates significant event risk and we would expect it keeps yields more or less grounded (barring sharp energy price rises) until the marathon begins. The Bank of Japan kicks of tomorrow, is followed by the Fed on Wednesday with the ECB and Bank of England taking center stage on Thursday. None of them will budge but we’ll be looking for some to lay the groundwork for future moves as the ongoing war and elevated energy prices increasingly find their way into the real economy, pushing up inflation and inflation expectations. Short-to-medium term gauges for the latter such as the 1-year, 1-year forward inflation swap as of Friday rose beyond the previous highs seen at 2.2% to hit the highest in almost two years. The BoJ was already preparing for further rate hikes even prior to the conflict and we’ll be monitoring the ECB and Bank of England for similar signs. Longer-term yields today do tick higher (inflation risks), but trading is technically irrelevant with changes being less than 2 bps in both the US and Europe.

European equities added up to 0.7% (EuroStoxx50) at some point, rebounding after correcting lower last week. But momentum dwindled with the entering of US investors. Gains are now close to flat. US bourses are catching a breather today after having rallied to new record highs (S&P500, Nasdaq) on Friday. Expected volatility, measured by the VIX index, is higher than at the start of the year but around the levels seen just before the first US-Israeli attacks on Iran in the weekend bridging February with March.

The dollar on currency markets is trading on the backfoot, posting back-to-back losses against its European peer. EUR/USD rises to the 1.175 area. DXY (trade-weighted dollar index) followed the intraday trajectory of oil, opening higher around 98.6 but then nudging south again to trade around 98.25. The yen creates some (very) limited room away from USD/JPY 160. Commodity-based currencies such as the Aussie and kiwi dollar as well as the Norwegian krone are among the best performers today.

News & Views

The ECB published its quarterly SAFE survey on the access of finance of enterprises. It showed a further tightening of lending conditions. Firms reported a significant net increase in bank loan interest rates (net 26%, up from 12% in Q4 2025). Other financing costs also rose sharply (net 37%) with collateral requirements remaining elevated (net 14%). Financing needs were broadly stable while loan availability deteriorated marginally. The war in the Middle East significantly boosted cost and price expectations, but not wage expectations. The latter even moderated from 3.1% to 2.8%. Input costs (including energy) are expected to rise by 5.8% over het next 12 months (up from 3.6% in Q4 2025) while selling prices are seen increasing by 3.5% (from 2.9%). Median one-year ahead inflation expectations from 2.6% to 3% with remained stable at 3% for the medium and long term. Upside inflation risks at the 5-year horizon increased, with 65% of firms reporting them (from 56%).

A survey from the Confederation of British Industry showed the broadest Y/Y-decline in retail sales in more than 40 years. The monthly retail sales volume measure dropped to -68 in April from -52 in March. 77% of firms reported sales were down compared with last year with only 9% reporting higher sale. Other details like orders placed (-46 from -26) or sales for the time of the year (-32 from -23) deteriorated as well, both for realized and expected sales. Expectations for next month fell from -49 to -60, the lowest level since March 2021.

Daily Pivots: (S1) 1.1688; (P) 1.1706; (R1) 1.1741; More….

No change in EUR/USD's outlook and intraday bias remains neutral. Further rally is expected with 1.1662 support intact. On the upside, sustained trading above 61.8% retracement of 1.2081 to 1.1408 at 1.1824 will pave the way to retest 1.2081 high. However, firm break of 1.1662 support will indicate the the rebound fro 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 1.1530). 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) 1.3477; (P) 1.3508; (R1) 1.3563; More...

Intraday bias in GBP/USD remains neutral first, and further rise is expected as long as 1.3446 support holds. On the upside, firm break of 61.8% retracement of 1.3867 to 1.3158 at 1.3596 will pave the way to retest 1.3867 high. However, break of 1.3446 will turn bias back to the downside for deeper pullback.

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 back in favor for a later stage, towards 1.4248 key resistance (2021 high).

Daily Pivots: (S1) 0.7837; (P) 0.7858; (R1) 0.7870; More….

Intraday bias in USD/CHF stays neutral and outlook is unchanged. Further decline is expected as long as 0.7933 resistance holds. On the downside, sustained break of 61.8% retracement of 0.7603 to 0.8041 at 0.7770 will pave the way to retest 0.7603 low. However, break of 0.7933 resistance will bring stronger rise back to retest 0.8041 high.

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 0.8053) 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) 159.13; (P) 159.49; (R1) 159.73; More...

USD/JPY dips mildly today but remains bounded in established range below 160.45. Intraday bias remains neutral at this point. Further rise is expected with 157.49 cluster support (38.2% retracement of 152.25 to 160.45 at 157.31) intact. On the upside break of 160.45 will target a retest on 161.94 high. However, firm break of 157.31/49 will bring deeper fall back to 61.8% retracement at 155.38 next.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 153.81) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

Daily Pivots: (S1) 1.3651; (P) 1.3683; (R1) 1.3705; More...

USD/CAD's fall from 1.3965 resumed by breaking through 1.3629 temporary low. Intraday bias is back on the downside for retesting 1.3480 low. Firm break there will resume larger down trend. For now, risk will stay on the downside as long as 1.3713 resistance holds, in case of recovery

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. Further break of 1.4139 will confirm and bring retest of 1.4791 high.

Dollar is coming under renewed pressure as traders move to lighten long positions ahead of the FOMC meeting this week. The move reflects reluctance among traders to hold long USD exposure into an event that is seen as carrying downside risks for the currency.

The outcome of the meeting is largely a foregone conclusion, with rates expected to remain unchanged at 3.50%–3.75%. Rather than expecting a policy surprise, markets are focused on the risk of a less-hawkish message that could also be interpreted as a dovish tile. .

The inflation backdrop is central to this shift. Headline CPI rose from 3.0% to 3.3% in March, but the increase was driven almost entirely by a 10.9% surge in energy costs. Core CPI, by contrast, eased from 2.8% to 2.6%, reinforcing the argument that underlying inflation pressures are still relatively contained.

This distinction allows the Fed to treat the recent inflation spike as transitory. With oil prices stabilizing at elevated levels rather than accelerating further, the urgency for a hawkish shift has diminished.

Labor market signals add to the case for caution. The sharp contrast between strong hiring in January/March and deep contraction in February highlights ongoing volatility, while the broader picture suggests a low hiring, low firing environment. This suggests a fragile equilibrium, where the Fed may prefer to avoid aggressive policy moves that could disrupt stability.

Market pricing reflects this outlook clearly. Fed funds futures are assigning virtually no probability to a rate hike this year, while indicating around a 30% chance of a cut by the end of the year.

Meanwhile, the updated projections will also be key. Inflation forecasts are likely to be revised higher in the short term, while growth projections may be trimmed. The net result could be a dot plot that still points to one rate cut this year—hardly a hawkish signal.

The leadership transition adds another dimension to the story. As Powell prepares to hand over to Kevin Warsh on May 15, markets expect him to avoid setting a new policy direction at this stage. A balanced tone, intended to leave flexibility for the incoming chair, could instead be interpreted as confirmation that the Fed is moving away from a hawkish stance.

In FX markets, the reaction is already clear—Dollar is the weakest performer of the day so far, while Kiwi and Aussie lead gains, followed by Euro, reflecting a broader shift toward risk-sensitive currencies.

In Europe, at the time of writing, FTSE is down -0.27%. DAX is up 0.49%. CAC is up 0.14%. UK 10-year yield is down -0.176 at 4.985. Germany 10-year yield is up 0.024 at 3.022. Earlier in Asia, Nikkei rose 1.38%. Hong Kong HSI fell -0.20%. China Shanghai SSE rose 0.16%. Singapore Strait Times fell -0.61%. Japan 10-year JGB yield rose 0.0387 to 2.479.

ECB Survey Signals Inflation Reacceleration Risk as Firms Lift Price and Cost Expectations

Eurozone firms are raising prices again. The ECB’s SAFE survey shows a sharp jump in selling price and cost expectations following the Middle East energy shock, while wages remain contained—signaling a renewed inflation pulse with limited second-round effects. Read More.

German Consumer Confidence Sinks to Two-Year Low as Inflation and War Fears Hit Sentiment

German consumer sentiment is deteriorating sharply, with the GfK index falling to its lowest level since 2023. Inflation is crushing income expectations while geopolitical tensions linked to Iran are darkening the economic outlook, raising fresh concerns over consumption and growth. Read More.

Oil Stalls as ‘Frozen Conflict’ Replaces Escalation Fears in US–Iran Standoff

Oil trades in a tight range as US–Iran tensions enter a “frozen conflict” phase. With Brent testing key near term channel resistance and traders reluctant to chase headlines, the next directional move will depend on a break above $110 or rejection lower. Read More.

AUD/JPY Eyes Breakout Toward 120 as BoJ Decision and Australia CPI Set Up High-Stakes Week

AUD/JPY is approaching a breakout point as BoJ policy and Australia CPI set the tone for the week. With yen weakness risks rising and inflation expected to accelerate, the pair could push toward 120 if key catalysts align. Read More.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3651; (P) 1.3683; (R1) 1.3705; More...

USD/CAD's fall from 1.3965 resumed by breaking through 1.3629 temporary low. Intraday bias is back on the downside for retesting 1.3480 low. Firm break there will resume larger down trend. For now, risk will stay on the downside as long as 1.3713 resistance holds, in case of recovery

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. Further break of 1.4139 will confirm and bring retest of 1.4791 high.

The ECB’s latest Survey on the Access to Finance of Enterprises (SAFE) points to a renewed build-up in price pressures, driven largely by the fallout from the Middle East conflict. Firms reported a marked increase in expectations for both selling prices and input costs over the next 12 months, highlighting a shift in the near-term inflation outlook.

Selling price expectations rose from 2.9% to 3.5%, while input costs—including energy—jumped more sharply from 3.6% to 5.8%. The increase reflects the direct impact of higher energy prices following the escalation in the Middle East, with firms passing through rising costs into pricing decisions. Notably, daily survey responses showed a clear shift after late February, with firms surveyed after the onset of the conflict reporting significantly higher expectations.

In contrast, wage dynamics appear more contained. Wage growth expectations edged down from 3.1% to 2.8%, suggesting that the current inflation impulse is being driven more by external cost shocks than domestic labor pressures.

Inflation expectations mirror this divergence between short-term pressure and longer-term stability. One-year ahead inflation expectations increased from 2.6% to 3.0%, accompanied by a wider dispersion in outlooks, reflecting heightened uncertainty. However, expectations for three- and five-year horizons held steady at 3.0%, indicating that longer-term inflation expectations remain anchored despite the recent shock.

That said, underlying risks are shifting. The share of firms expecting upside risks to five-year inflation rose from 56% to 65%, and the distribution of long-term expectations has widened.

Full ECB SAFE release here.

• We expect the Fed to maintain its policy rates unchanged at the April meeting, in line with broad consensus and market pricing. We forecast the Fed resuming rate cuts in September, earlier than markets price in, but do not expect firm forward guidance at this stage.
• Senator Tillis' decision to support Kevin Warsh's nomination as the new Fed Chair means, that the April meeting will be Powell's final one as the Chair. Powell could announce whether he intends to continue in the Fed Board of Governors until the end of his term (Jan 2028), or step down.
• The Fed is likely to reaffirm its earlier guidance for slowing down Reserve Management Purchases (RMPs) of T-bills after April. We expect market reactions to be limited, but see risks skewed towards lower UST yields and weaker USD if Powell maintains the door open for cuts this year.

With markets pricing essentially no risk for a policy rate change this week and with no new economic projections, Wednesday's main focus will be on Powell. And not just for policy reasons, but also as the meeting will most likely end up being Powell's last one as the Fed chair. He has not yet confirmed whether he intends to step down also from the Fed Board of Governors but could provide the guidance in the press conference. Powell's term as a Governor runs until January 2028.

Senator Thom Tillis confirmed he is ready to advance Kevin Warsh's nomination as the new Chair after Department of Justice announced it is ending the investigation against the Fed. On the Fed Board Warsh replaces Stephen Miran (the most dovish governor). But if Powell steps down, Trump could renominate Miran right back.

The Fed remains in a comfortable position to wait-and-see how the energy supply outlook evolves and how will the economy react. The latest available CPI data from March suggested that underlying core inflation pressures had remained well in check, and markets' longer-term inflation expectations have remained very steady.

Economic growth remains resilient but slowing. Atlanta Fed's Nowcast for Q1 GDP growth has declined to just 1.2% Q/Q AR from 3.0% two months ago. Part of the slowdown is linked to a rebound in imports amid lower tariffs, but estimates for private consumption have also declined. We think that lack of labour supply growth and tighter financial conditions will continue to weigh on growth towards H2, and pave way for resuming rate cuts in September and December (chart 1).

This week will not yet be the time for providing firm forward guidance. But as market prices in only cumulative 10bp of cuts by December, even cautious hints of resuming easing could trigger a move lower in UST yields and broad USD. We expect the Fed to reaffirm its earlier guidance for slowing down the pace of Reserve Management Purchases of T-bills after April. The purchases have already started declining after the April Tax Date, and are likely to stabilize below USD10bn per month, down from a recent pace of more than USD50bn per month (chart 2).