Markets responded positively on Monday to reports of progress in US-Iran negotiations, with optimism surrounding a potential agreement boosting risk sentiment and weighing on the US Dollar. The British Pound (GBP) strengthened against the US Dollar (USD), with GBP/USD climbing 0.54% toward the 1.3500 mark, its highest level since May 14 [1]. The Canadian Dollar (CAD) also firmed against the USD, with USD/CAD trading around 1.3803 after easing from an intraday high near 1.3820 [3].
According to Nikkei, the US and Iran have agreed to extend the ceasefire from early April by 60 days, with Iran expected to clear mines in the Strait of Hormuz within 30 days of the agreement, reopening the strait to international shipping and suspending transit fees [2]. The deal reportedly includes a phased lifting of sanctions on Iranian assets and a resumption of nuclear talks during the two-month ceasefire extension, pending approval by Iranian Supreme Leader Ayatollah Mojtaba Khamenei [2]. US President Donald Trump described the negotiations as progressing “in an orderly and constructive manner,” but emphasized there was “no rush” to finalize an agreement [1]. Iranian Foreign Ministry spokesman Esmaeil Baghaei confirmed progress in Pakistan-mediated talks but cautioned that signing an agreement was not imminent [1].
The prospect of a US-Iran deal led to a sharp decline in crude oil prices, with West Texas Intermediate (WTI) falling to a three-week low below $90.00 per barrel, down nearly 7% on the day [2][3]. This drop in oil prices eased fears of an energy-driven inflation shock, though prices remain above pre-war levels, keeping inflation concerns in focus [1][3]. The US Dollar Index (DXY) consolidated losses near the 99.00 mark after touching more than one-month highs around 99.50 last week [1][3].
Despite the improved sentiment, markets remain cautious due to unresolved issues in the negotiations, including disagreements over Iran’s nuclear program, sanctions relief, the release of frozen Iranian assets, and the US naval blockade on Iranian ports [1][3]. Political uncertainty in the UK and the upcoming US Personal Consumption Expenditures (PCE) Price Index data on Thursday are also contributing to a cautious market outlook [1][3]. Investors are closely monitoring upcoming speeches from Federal Reserve and Bank of England officials for further guidance on interest rate policy [1][3].
CONCLUSION
Progress in US-Iran ceasefire negotiations has boosted risk sentiment, weakened the US Dollar, and triggered a sharp drop in oil prices. However, lingering uncertainties in the talks and ongoing inflation concerns are keeping markets cautious. Investors are now focused on upcoming economic data and central bank commentary for further direction.