Global financial markets stabilized on Wednesday following a two-day risk rally, as investors focused on the prospect of a U.S.-Iran ceasefire and its implications for currencies, commodities, and bond yields [1][6]. U.S. President Donald Trump expressed confidence in interviews with ABC News and the New York Post that a permanent ceasefire with Iran could be reached within the next two days, stating, 'I think you’re going to be watching an amazing two days ahead. I really do.' However, he also noted that he does not believe it will be necessary to extend the current two-week ceasefire [2][4][5]. U.S. Vice President JD Vance echoed optimism, citing 'significant progress' in initial negotiations held in Pakistan, with follow-up talks expected soon [1][5]. United Nations Secretary-General António Guterres said it is 'very probable' that talks will resume this week [4].
The U.S. military announced a full blockade of the Strait of Hormuz, effectively shutting Iran’s sea trade, which accounts for about 90% of its GDP. This move is intended to pressure Iran into a deal but also exacerbates global oil supply concerns [4][5]. Oil prices, which had surged on supply fears, have started to ease as optimism for a resolution grows, helping to anchor inflation expectations [2][5].
Currency markets reflected these developments. The U.S. Dollar Index (DXY) hovered near a seven-week low at 98.00, down more than 0.5% for the week, with the USD weakest against the Australian Dollar (-2.18%) and also losing ground to the Euro and Pound [1][2][4]. The EUR/USD pair held gains near 1.1800, returning to pre-war levels after a 2.5% rally over seven days, as investors dialed back USD long positions on hopes of a peace deal [4]. The GBP/JPY cross traded near mid-215.00s, close to its July 2008 peak, as the Yen remained under pressure due to Japan’s reliance on Middle East oil and concerns over the Hormuz blockade [3][5]. EUR/JPY steadied near 187.50, with the Yen further weighed by speculation of possible Japanese intervention and warnings from Bank of Japan Governor Kazuo Ueda about the economic fallout from higher oil prices [5].
In commodities, silver (XAG/USD) struggled to extend its recovery above $81.00, trading subduedly around $79.50. While easing geopolitical tensions typically reduce demand for safe-haven assets like silver, the metal’s outlook remains firm due to anchored inflation projections and technical support above the 20-day EMA at $75.91. The CME FedWatch tool indicates a 65% chance that the Federal Reserve will not adjust monetary policy this year [2].
U.S. Treasury yields were flat on Wednesday, with the 10-year note at 4.2558%, the 2-year at 3.7572%, and the 30-year bond yield down by more than 1 basis point at 4.8633%. Yields had fallen on Tuesday after the March Producer Price Index (PPI) rose by 0.5%, below the 1.1% consensus estimate, suggesting easing inflation pressures [6][4]. The Mortgage Bankers Association reported the average 30-year fixed mortgage rate fell to 6.51% for the week ending April 3 [6].
Looking ahead, markets are awaiting further speeches from central bank policymakers, including ECB President Christine Lagarde and BoE Governor Andrew Bailey, as well as upcoming economic data releases such as Eurozone industrial production and U.S. import/export prices [1][4][6]. The ECB is seen as well-positioned to manage developments related to Iran, with markets pricing in modest tightening at the April 30 meeting and expectations of two additional rate hikes this year [5]. Technical analysis suggests EUR/USD maintains a bullish tone, while GBP/JPY and EUR/JPY may see consolidation amid overbought conditions and intervention risks [3][4][5].
CONCLUSION
Markets are stabilizing as optimism grows for a U.S.-Iran ceasefire, easing oil and inflation concerns and supporting risk assets. The U.S. Dollar and Japanese Yen remain under pressure, while the Euro and Pound benefit from shifting rate expectations. Investors are closely watching upcoming negotiations and central bank signals for further direction.